4,000 year old skull discovery shows young women were sacrificed in ancient China

By Agence France-PresseMonday, December 2, 2013 8:51 EST

Archaeologists in China have unearthed the skulls of more than 80 young women who may have been sacrificed more than 4,000 years ago, state media reported Monday.

The skulls were found in what appears to have been a mass grave at the Shimao Ruins, the site of a neolithic stone city in the northern province of Shaanxi.

The women’s bodies were not present, the official news agency Xinhua said, adding that archaeologists concluded that the skulls were “likely to be related to the construction of the city wall” in “ancient religious activities or foundation ceremonies” before construction began.

There may have been an outbreak of mass violence or ethnic conflict in the region at the time since “ancient people were prone to use their enemies or captives as sacrifices”, it added.

The discovery is not the first instance of researchers unearthing remains related to human sacrifice in early China. Kings and emperors were regularly buried along with their servants and concubines, who were sometimes killed first — and on other occasions buried alive.

The Shimao Ruins cover more than four square kilometres and were discovered in 1976.

The total includes 40 skulls that the Shaanxi provincial government said earlier had been discovered at the site last year.

Sun Zhouyong, deputy head of the Shaanxi Provincial Institute of Archaeology, told state broadcaster CCTV that the initial batch “show signs of being hit and burned”.

“This collective burial might also have something to do with the founding ceremony of the city,” he said.

Archaeologists have also found more than 100 remains of murals as well as large amounts of jadeware at the site of the ancient city, which sits in the Yellow River basin and is believed to date back to 2000 BC.

In 2005 archaeologists at Hongjiang in the central province of Hunan found an altar devoted to human sacrifice as well as the skeleton of one victim.

A separate altar was used for sacrificing animals at the 7,000-year-old site, which is believed to be the earliest human sacrificial site ever found in the country.

SAN FRANCISCO — With blood oozing from deep lacerations, the two patients arrived at California Pacific Medical Center’s tidy emergency room. Deepika Singh, 26, had gashed her knee at a backyard barbecue. Orla Roche, a rambunctious toddler on vacation with her family, had tumbled from a couch, splitting open her forehead on a table.

On a quiet Saturday in May, nurses in blue scrubs quickly ushered the two patients into treatment rooms. The wounds were cleaned, numbed and mended in under an hour. “It was great — they had good DVDs, the staff couldn’t have been nicer,” said Emer Duffy, Orla’s mother.

Then the bills arrived. Ms. Singh’s three stitches cost $2,229.11. Orla’s forehead was sealed with a dab of skin glue for $1,696. “When I first saw the charge, I said, ‘What could possibly have cost that much?’ ” recalled Ms. Singh. “They billed for everything, every pill.”

In a medical system notorious for opaque finances and inflated bills, nothing is more convoluted than hospital pricing, economists say. Hospital charges represent about a third of the $2.7 trillion annual United States health care bill, the biggest single segment, according to government statistics, and are the largest driver of medical inflation, a new study in The Journal of the American Medical Association found.

A day spent as an inpatient at an American hospital costs on average more than $4,000, five times the charge in many other developed countries, according to the International Federation of Health Plans, a global network of health insurance industries. The most expensive hospitals charge more than $12,500 a day. And at many of them, including California Pacific Medical Center, emergency rooms are profit centers. That is why one of the simplest and oldest medical procedures — closing a wound with a needle and thread — typically leads to bills of at least $1,500 and often much more.

At Lenox Hill Hospital in New York City, Daniel Diaz, 29, a public relations executive, was billed $3,355.96 for five stitches on his finger after cutting himself while peeling an avocado. At a hospital in Jacksonville, Fla., Arch Roberts Jr., 56, a former government employee, was charged more than $2,000 for three stitches after being bitten by a dog. At Mercy Hospital in Port Huron, Mich., Chelsea Manning, 22, a student, received bills for close to $3,000 for six stitches after she tripped running up a path. Insurers and patients negotiated lower prices, but those charges were a starting point.

The main reason for high hospital costs in the United States, economists say, is fiscal, not medical: Hospitals are the most powerful players in a health care system that has little or no price regulation in the private market.

Rising costs of drugs, medical equipment and other services, and fees from layers of middlemen, play a significant role in escalating hospital bills, of course. But just as important is that mergers and consolidation have resulted in a couple of hospital chains — like Partners in Boston, or Banner in Phoenix — dominating many parts of the country, allowing them to command high prices from insurers and employers.

Sutter Health, California Pacific Medical Center’s parent company, operates more than two dozen community hospitals in Northern California, almost all in middle-class or high-income neighborhoods. Its clout has helped California Pacific Medical Center, the state’s largest private nonprofit hospital, also earn the highest net income in California. Prices for many of the procedures at the San Francisco hospital are among the top 20 percent in the country, according to a New York Times analysis of data released by the federal government.

“Sutter is a leader — a pioneer — in figuring out how to amass market power to raise prices and decrease competition,” said Glenn Melnick, a professor of health economics at the University of Southern California. “How do hospitals set prices? They set prices to maximize revenue, and they raise prices as much as they can — all the research supports that.”

In other countries, the price of a day in the hospital often includes many basic services. Not here. The “chargemaster,” the price list created by each hospital, typically has more than ten thousand entries, and almost nothing — even an aspirin, a bag of IV fluid, or a visit from a physical therapist to help a patient get out of bed — is free. Those lists are usually secret, but California requires them to be filed with health regulators and disclosed.

California Pacific Medical Center’s 400-page chargemaster for this year contains some eye-popping figures: from $32,901 for an X-ray study of the heart’s arteries to $25,646.88 for gall bladder removal (doctor’s fees not included) to $5,510 for a simple vaginal delivery (not including $731 for each hour of labor, or $137 for each bag of IV fluid). Even basic supplies or services carry huge markups: $20 for a codeine pill (50 cents at Rite-Aid or Walgreens), $543 for a breast-pump kit ($25 online), $4,495 for a CT scan of the abdomen (about $400 at an outpatient facility nearby). Plenty of other hospitals set similar prices.

Dr. Warren Browner, the chief executive officer of California Pacific Medical Center, said that there were good reasons that hospitals charged what they did: They must have highly trained professionals available 24 hours a day, seven days a week. They must constantly upgrade to the latest equipment and building standards to meet patients’ expectations and state mandates. They charge paying or well-insured patients more to compensate for others they treat at a loss.

“Hospital care is extremely expensive to produce and to have available for everyone in the community,” he said, noting that hospitals needed to have a neurosurgeon on call in case a patient turned up with a blood clot on the brain. “We take every penny of the revenue we earn and use it to build new and better facilities for everyone in the city.”

Some health economists say that even though most hospitals are nonprofit, they nonetheless are often flush with revenue and guilty of unnecessary spending.

“Hospitals are self-fueling, ever-expanding machines,” said James Robinson, an economist and professor of health policy at the University of California, Berkeley. “There is an infinite amount of stuff to buy — amenities, machines, new wings, higher salaries, more nurses.”

“But,” he asked, “to deliver good health care, what do you need?”

Few Constraints

There is little science to how hospitals determine the prices they print on hospital bills.

“Chargemaster prices are basically arbitrary, not connected to underlying costs or market prices,” said Professor Melnick, the economist. Hospitals “can set them at any level they want. There are no market constraints.”

Prices for any item or service are set by each hospital and move up and down yearly, and show extraordinary variability, health economists say. The codeine that costs $20 and the bag of IV fluid that costs $137 at California Pacific are charged at $1 and $16 at the University of California San Francisco Medical Center, across town. But U.C.S.F. Medical Center charges $1,600 for an amniocentesis, which costs $687 at California Pacific.

After each hospital stay or visit, computer programs and human coders and billers use the chargemaster price list to translate the services rendered into a price. Sutter employs more than 1,300 people at a special center in Roseville, Calif., to perform this and other administrative tasks for its hospitals. Emergency room visits typically include separate charges for doctor’s services and for supplies, as well as a “facility fee” — the charge for walking in the door.

Orla Roche’s bill, for example, included $529 for “supplies and devices,” though her mother is perplexed about what those are: Orla left the emergency room with gauze wrapped round her head (under $1 at Internet supply stores), festooned with a pink cartoon sticker. According to the chargemaster price list for California Pacific, a vial of skin glue is billed at $181, a tube of antibiotic cream at $125.84 and a vial of local anesthetic at $79.73. These items can be purchased for $15.99, $36.99 and $5 on the Internet, though hospitals — which buy wholesale and in bulk — pay far less.

The bill also included $1,167 for the facility fee, which was classified at Level 3 — the middle of the scale, though Orla’s treatment was one of the most simple emergency room interventions. At Lenox Hill in New York, Daniel Diaz’s unusually detailed bill for his stitches included $1,828 for emergency room services, $628 for repairing the wound, $571.83 for “application of a finger splint,” $97.10 for a tetanus shot, and $311 for someone to give the injection. At Sparrow Hospital in Lansing, Mich., 2-year-old Ben Bellar’s bill for six stitches, more than $2,000, included $145.20 for “pharmacy” — a spoonful of ibuprofen and local anesthetic, his mother said.

Economists note that hospitals can bill for emergency room care with relative impunity, since injured patients generally rush to the nearest treatment facility. But worried about high prices, even the sick sometimes shop around. When Jamie Burke, 33, a graduate student in North Carolina, came to after she was knocked out during a soccer game in April, she started searching on her smartphone for an in-network hospital as a friend drove.

“It was crazy,” she said, “but luckily I wasn’t unconscious, so I could figure it out.”

She is glad she did: Though the hospital billed $5,039, her insurer’s in-network contracted rate was about $2,700. With copays and coinsurance, she owed $600 for the visit.

The uninsured are particularly vulnerable to high prices since they have no one to argue on their behalf. When Arch Roberts Jr. got his bill of more than $2,000 for stitches, he explained that he was uninsured and his business had failed during the housing crisis, so he could not afford the fee. The hospital offered him a “charity care discount” — a price that was still out of range. “I don’t have $800 to pay them any more than I have $2,000” for three stitches, he said, noting that the hospital has been “relentless” in its collection efforts.

Paths to Profit

Once perennial money pits, emergency rooms have become big moneymakers for most hospitals in the last decade, experts say, as they raised their fees and “managed” their patient mix. California Pacific Medical Center has nearly doubled its emergency room fees since 2005, its chargemaster price lists show.

California Pacific’s emergency room is not a trauma center; poor or uninsured trauma patients who require lengthy inpatient stays can strain a hospital budget. And insurers allow emergency rooms to bill more than urgent-care centers for simple procedures like stitches or X-raying a sprained ankle, making such procedures profitable. Indeed, the financial prospects are so appealing that doctors’ groups in Texas are opening free-standing “emergency rooms” that are not connected to hospitals.

“Hospitals see where they’re making money and try to do more of that,” said Dr. David Gifford, a former health commissioner of Rhode Island, who has studied how labs price their tests. He said that laboratory tests and X-rays are priced high and are profitable, though there is no difference in quality from national commercial labs that charge far less. A blood count and blood electrolyte test — ordered every day for most inpatients and often in the emergency room — are priced at $259.06 and $293.25 on California Pacific Medical Center’s chargemaster price list. Insurers often pay outside labs less than $10 for the services.

And, like any business, many hospitals try to do fewer services that are not well paid. In 2012, over loud patient protests, California Pacific Medical Center outsourced its kidney dialysis unit to DaVita Health Care Partners, a commercial company, citing decreasing reimbursement. More than five years ago, after Sutter acquired St. Luke’s, a decrepit hospital in a poor neighborhood, it tried to shut the facility and convert it to an outpatient clinic, which often generate scans and other expensive tests. (The City of San Francisco rejected the plan.) It did close the hospital’s acute psychiatric unit, a division that almost always loses money.

“You need a Ph.D. in health economics” to understand medical pricing, said Dr. Browner, who has acknowledged that California Pacific’s chargemaster prices might appear high. But he added, “We have to recoup what it costs to keep open, what it costs to take care of the un- and underinsured and to rebuild.”

He said that MediCal, California’s Medicaid program, pays California Pacific Medical Center only 10 to 20 percent of its actual costs for care. Medicare pays about 70 percent, he said, generally with a predetermined flat fee for each admission based on the patient’s diagnosis. In contrast, many private insurers still pay separately for services rendered, based on discounts from the chargemaster prices.

Dr. Browner also pointed to what health care executives call the “Saudi sheikh problem” at some hospitals.

“You don’t really want to change your charges if you have a Saudi sheikh come in with a suitcase full of cash who’s going to pay full charges,” he said.

But how much actual charity care does a hospital like California Pacific Medical Center perform? And are insurers and patients paying hospitals for better quality? Or also for amenities like valet parking, useless medical gadgetry and inflated salaries?

Though hospitals’ nonprofit status allows them to reap tens or hundreds of millions of dollars in tax benefits, California Pacific Medical Center’s main campuses spent 1.27 percent of their more than $1.1 billion in net patient revenues in 2011 on free care for indigent or uninsured patients, lower than the state average of 2.07 percent, according to statistics compiled by the San Francisco Department of Public Health. The far smaller St. Luke’s branch spent 5.32 percent that year.

Sutter, based in Sacramento, employs 28 officials who make more than $1 million a year, and four of them are among the top-paid hospital executives in the state. Sutter’s chief executive officer makes more than $5 million. In 2011, Dr. Browner, 62, a distinguished physician who spent much of his career in academics, made more than $1.2 million, according to tax documents.

California Pacific, Sutter’s main campus, is in upscale Pacific Heights. It has just broken ground on a $2.7 billion renovation, which includes a new flagship hospital. Though the project was initiated to meet new state earthquake standards, the facility is designed as a sleek glass and marble structure with all private rooms, underground parking and roof gardens with flowers and bees “to enhance the quality of the healing environment,” according to California Pacific Medical Center’s website. Its Facebook page has called it “the coolest hospital in San Francisco, possibly the country and even the world.”

Consumers may appreciate — or demand — features that contribute to bigger hospital bills. But studies have found no correlation between prices and patient outcomes. A California state rating of hospital services by the California Health Care Foundation gave California Pacific Medical Center average scores in most categories, though its surgical-care measures were rated “superior.”

Its crosstown neighbor, University of California San Francisco, a nationally ranked academic institution, charges far less per day than California Pacific, when the greater severity of illnesses of its patients is factored in, Professor Melnick said. In fact, a recent study in the publication Annals of Surgery, a monthly review of surgical science, found that hospitals with the highest complication rates tended to have higher prices.

From such variations, economists conclude that “costs” are highly discretionary, noting that hospitals in other developed countries often provide high-quality care, with better outcomes in comparatively no-frills environments. Said Dr. Robinson, the Berkeley health economist: “If you pay hospitals more, they spend it. If you pay them less, they adjust. The only way to pay less for health care — is to pay less for health care.”

Hospital officials like to say that their list prices do not reflect what most patients actually pay, because private and government insurers negotiate discounts. Simone Singh, a professor of health management and policy at the University of Michigan, estimated that insurers generally paid 40 to 50 percent of charges. But with powerful chains like Sutter, prices are high and the discounts often are not so generous. Patients are left paying more.

A Price ‘Sequoia’

For her three stitches at California Pacific Medical Center, Deepika Singh ended up paying $768.56 — a lot of money for a 26-year-old retail supply chain manager — of the $1,813 rate her insurer negotiated for the approximately $2,200 bill. Ms. Duffy owed $1,366 after her insurer’s discount on 2-year-old Orla’s $1,700 bill, since the family had not met its annual deductible. “How much is that per minute?” she asked.

Across California, Sutter hospitals have proved expert at the business of medicine. “Our members are very exercised about Sutter — it has increased prices disproportionately,” said David Lansky, chief executive officer of the Pacific Business Group on Health, which represents 60 of California’s biggest private employers in its health care negotiations. “Sutter has been successful at leveraging their huge size in dictating not just price but contract terms.”

Its major competitor is Kaiser, a health maintenance organization that runs a closed network of hospitals and doctors. California Pacific Medical Center delivers more than half the babies in San Francisco and is the city’s largest employer after Wells Fargo. Sutter contracts also include “gag clauses” that prevent employers from knowing what rates have been negotiated by their insurers on their behalf, Mr. Lansky said.

Chuck Idelson, a spokesman for the Institute for Health and Socio-Economic Policy, the research arm of the California Nurses Association, said Sutter prices were 40 to 70 percent above its rivals’ for similar services. When Sutter bought Summit Hospital in Oakland in 1999, rates there went up 29 percent to 72 percent, researchers found. Because of pricing issues, proposed insurance plans under the Affordable Care Act did not initially include Sutter hospitals.

Terry Miller, 62, a businessman in the Bay Area, got a bill for $117,000 for a two-night stay at California Pacific Medical Center to place a stent to open one of his heart’s clogged arteries — a charge that did not include fees for the cardiologist and radiologist. According to the Medicare database, California Pacific Medical Center charged $43,679 for hospitalization to treat a simple pneumonia and $96,642 to treat a stroke; the Medicare payments for those illnesses were $8,046 and $9,583.

The high prices have had a ripple effect across Northern California, allowing smaller hospitals to charge more as well. “Sutter is the tallest Sequoia and everyone goes up just underneath them a bit,” said Professor Melnick. He noted that hospital prices in California had more than doubled in the past decade, after adjustment for inflation.

And payouts in the Pacific region for simple emergency room treatments — stitches, a sprained ankle and an upper respiratory infection — were by far the highest in the country, about 50 percent higher than in the Northeast, according to an analysis performed for The Times. by the health care consulting firm Truven Health Analytics.

The Merger Factor

In theory, health care consolidation can lead to economies of scale, but not if it produces complex supersize systems. Excess administrative costs accounted for about $190 billion of the $2.5 trillion medical bill of the United States in 2009, the Institute of Medicine estimated this year — money that could be used for other purposes.

“There is a big flurry of consolidation and the effects depend on what the objective of the health care system is,” said Orry Jacobs of the health care consulting firm BDC Advisors. “If the intent is to improve care and bend cost curves, then networks can do so. If the objective is to corner the market and demand higher rates, then that will happen.” Indeed, research shows that today’s hospital mergers tend to drive up prices.

And employers have limited ability to fight back. Sutter operates the only hospital in some California cities. Beginning on Jan. 1, the University of California, Berkeley, will exclude Sutter’s two nearby hospitals from its plan because it could not reach a price agreement. The university’s employees will have to cross the bay or drive inland for in-network hospital treatment, or pay more.

As is often the case in American medicine, patients will decide if they are willing to pay the high price of care. Back home in New York City, Orla Duffy’s head wound has healed nicely without further treatment. Deepika Singh had her stitches taken out at an urgent care clinic, costing $25 with her copay, during a business trip to Washington.

Daniel Diaz, who had been treated at Lenox Hill, Mr. Roberts and Amy Bernstein had no choice but to visit an emergency room this year for stitches. But they all refused to see a doctor for the follow-up.

“The amount was outrageous for the time it took to put them in,” said Ms. Bernstein, 54, a real estate lawyer from Long Island, who cut herself cleaning knives while fixing a kitchen damaged by Hurricane Sandy. “I was so disgusted, I took them out myself.”

Jo Craven McGinty contributed reporting from New York.

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December 2, 2013

Cost of Health Care Law Is Seen as Decreasing

By ANNIE LOWREYNYT

WASHINGTON — The rollout of President Obama’s health care law may have deeply disappointed its supporters, but on at least one front, the Affordable Care Act is beating expectations: its cost.

Over the next few years, the government is expected to spend billions of dollars less than originally projected on the law, analysts said, with both the Medicaid expansion and the subsidies for private insurance plans ending up less expensive than anticipated.

Economists broadly agree that the sluggish economy remains the main reason that health spending has grown so slowly for the last half-decade. From 2007 to 2010, per-capita health care spending rose just 1.8 percent annually. Since then, the annual increase has slowed even further, to 1.3 percent. A decade ago, spending was growing at roughly 5 percent a year.

But even though the Affordable Care Act might be more a beneficiary of changes in health care spending than the primary driver of them, the law’s provisions to control costs could prove increasingly important as the economy improves, demand for health care increases and spending picks back up.

“It was a trend that was happening; we noticed that trend; we took advantage of that trend,” said Jason L. Furman, the chairman of the White House’s Council of Economic Advisers. “Some of it was the Affordable Care Act catching up with the private sector, and some of it was pushing the private sector forward.”

Administration officials have pointed to falling hospital readmission rates as one strong sign that cost-control provisions in the Affordable Care Act are working. Also, they noted that a growing number of insurers and health care providers are agreeing to contracts that pay for the quality of care, rather than the quantity, another indication that the law’s encouragement on that front is starting to pay dividends.

But those are responsible for only a tiny portion of the slowing rise of health care costs; other changes, like rising deductibles and copays that discourage some people from seeking extra services, play a bigger role, analysts say. Still, the Kaiser Family Foundation, a nonprofit research group, estimates that the weak economy accounts for as much as three-quarters of the slowdown in the growth of spending on health care.

But even if only about a quarter of the savings is because of noneconomic factors, said Larry Levitt, a top official at the Kaiser Family Foundation, “that’s real change in the health system.”

Critics, however, say they see little evidence that the law will lead to significant cost savings.

“These claims are just as groundless as the ones that misled so many Americans to believe they would be able to keep their previous coverage,” argued Charles Blahous, a former Bush administration official now at the Mercatus Center at George Mason University.

To be sure, the Affordable Care Act will lead to a drastic bump in health spending by the government starting next year, with an estimated nine million Americans signing up for Medicaid and perhaps as many as seven million buying a subsidized health plan through the government exchanges. But economists expect the underlying rate of spending growth to remain low.

And whatever the reasons for the slower growth, taxpayers appear set to reap some benefits.

Already, the Congressional Budget Office has quietly erased hundreds of billions of dollars from its projections. It now estimates that Medicare spending in 2020 will be $137 billion lower than it thought in 2010, a drop of 15 percent; Medicaid spending will be $85 billion, or 16 percent, lower; and private health insurance premiums are expected to be about 9 percent lower.

Some economists say they believe that the Congressional Budget Office might be underestimating the long-term effect of the slowdown, because it expects that spending growth will eventually return to its previous trend line. David M. Cutler, a Harvard economist and former Obama adviser, cautiously suggests that the slower growth might stick around, and if so the savings for the government might be a whopping $750 billion over 10 years, he says.

Whether such improvements will last depends on whether private firms — nudged along by Washington — create and retain incentives to keep spending low.

“In the past five decades, there are only two periods when we’ve been able to sustain low excess health care cost growth for an extended period,” Mr. Levitt, of the Kaiser foundation, said, referring to the current trend and a period in the 1990s, when the Clinton administration tried and failed at overhauling the health care system. “There was a sense in the system: ‘Something is coming, and we need to get ready for it.’ ”

This time may be more durable. Insurance and hospital executives in Massachusetts, Illinois and California, among other places where reforms have gone the furthest, report a consensus that spending growth had become unsustainable, and that expectations that Washington would force changes to the system spurred them to make changes themselves.

Whatever the reasons, the overall slowdown in health costs has led to lower 2014 insurance premiums than analysts anticipated. That means not only cheaper plans for many consumers, but significant savings for the government.

One study by the liberal Center for American Progress, for instance, found that an average individual premium for a plan with relatively high out-of-pocket expenses in the insurance marketplaces is $3,900, about 16 percent lower than the $4,700 expected. If those savings were to stick, the Affordable Care Act would cost about $190 billion less than expected over the course of a decade, the center estimated.

Mr. Levitt pointed out that “premiums are particularly important for federal costs because of the way the tax credits work.” An individual purchasing a middle-of-the-road “silver” plan, for example, is required to devote a certain fixed proportion of his income to health insurance, with the federal government picking up the rest of the tab. “The government pays the rest of the premium, so it is more exposed to changes,” he said.

On top of that, the law might be smaller in scale than originally envisioned. Pervasive problems with the HealthCare.gov site might result in fewer sign-ups than government analysts anticipated, for one. But analysts cautioned that it was too soon to tell how the problems with the website would affect enrollment in private insurance.

On the public front, the 2012 Supreme Court decision allowing states to opt out of the Medicaid expansion slashed the number of people eligible for that program. The White House has stressed that it hopes that all states join the Medicaid expansion, which would help reduce costs for state governments as the federal government picks up most of the bill for the newly covered.

But if the 25 states that have not expanded Medicaid continue to elect not to join in the expansion, federal spending would be about $45 billion lower in 2016, according to calculations by the Urban Institute and the Kaiser Family Foundation.

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December 2, 2013

A New Wave of Challenges to Health Law

By SHERYL GAY STOLBERGNYT

WASHINGTON — More than a year after the Supreme Court upheld the central provision of President Obama’s health care overhaul, a fresh wave of legal challenges to the law is playing out in courtrooms as conservative critics — joined by their Republican allies on Capitol Hill — make the case that Mr. Obama has overstepped his authority in applying it.

A federal judge in the District of Columbia will hear oral arguments on Tuesday in one of several cases brought by states including Indiana and Oklahoma, along with business owners and individual consumers, who say that the law does not grant the Internal Revenue Service authority to provide tax credits or subsidies to people who buy insurance through the federal exchange.

At the same time, the House Judiciary Committee will convene a hearing to examine whether Mr. Obama is “rewriting his own law” by using his executive powers to alter it or delay certain provisions. The panel also will examine the legal theory behind the subsidy cases: that the I.R.S., and by extension, Mr. Obama, ignored the will of Congress, which explicitly allowed tax credits and subsidies only for those buying coverage through state exchanges.

“We have agencies under this administration having an attitude that they can fix a statute, that they can improve upon a statute, that they can look at a statute’s clear language and disregard it,” Scott Pruitt, the Oklahoma attorney general, who is bringing one of the cases, said in an interview Monday. “The president himself has said on more than one occasion, ‘I can’t wait on Congress.’ In our system of government, he has to.”

The subsidy lawsuits grow out of three years of work by conservative and libertarian theorists at Washington-based research organizations like the Cato Institute, the American Enterprise Institute and the Competitive Enterprise Institute. The cases are part of a continuing, multifaceted legal assault on the Affordable Care Act that began with the Supreme Court challenge to the law and shows no signs of abating.

“After the A.C.A. was enacted and after the president signed it, a lot of people — me included — decided that we weren’t going to take this lying down, and we were going to try to block it and ultimately either get the Supreme Court to overturn it or Congress to repeal it,” said Michael F. Cannon, a health policy scholar at the libertarian-leaning Cato Institute, who helped develop the legal theory for the subsidy cases and will testify in the House on Tuesday.

On Monday, the Supreme Court refused to hear a challenge brought by Liberty University, a Christian college in Virginia, to the “employer mandate,” which requires companies with more than 50 employees to offer coverage. In another challenge, the Pacific Legal Foundation, a conservative group, has filed suit claiming that the law is unconstitutional because it was introduced in the Senate, not the House, where tax bills must originate.

The law has also spawned a separate raft of religious freedom cases over its requirement that employers provide insurance coverage for contraception to their workers. The University of Notre Dame plans to file suit on Tuesday challenging an Obama administration rule that exempts religious employers like churches, but not nonprofits, like schools, which may cover contraception through third-party administrators. The Supreme Court agreed last week to hear a pair of similar suits from commercial corporations.

Jonathan Adler, a law professor at Case Western Reserve University and Mr. Cannon’s writing partner, predicts the act will be the subject of lawsuits for years.

“Among critics of the law there is a feeling that the law doesn’t have the same legitimacy as a law that passed with bipartisan support,” he said.

The subsidy cases, if successful, would strike at the foundation of the law. Subsidies and tax credits, which could be available to millions of low- and middle-income Americans, are central to Mr. Obama’s promise of affordable care. In drafting the law, Congress wrote that such financial help would be available to people enrolled “through an exchange established by the state” under the law.

But since passage of the Affordable Care Act in March 2010, the vast majority of states — roughly three dozen — decided not to set up their own exchanges, in part because many Republican governors opposed the law. That has left HealthCare.gov, the online federal insurance exchange, to handle the bulk of enrollment requests.

If courts rule that customers cannot get subsidies through the federal exchange, it would “make the HealthCare.gov problems look like a hiccup,” Mr. Cannon said.

The House hearing, titled “The President’s Constitutional Duty to Faithfully Execute the Laws,” will focus largely on the Affordable Care Act. Representative Robert W. Goodlatte, Republican of Virginia and chairman of the committee, argues that Mr. Obama has “changed key provisions in Obamacare without congressional approval,” through executive actions, like delaying the employer mandate for one year.

Aides to Mr. Obama say the president offers a legal rationale with each administrative decision, and legal experts say judges ordinarily give agencies like the I.R.S. broad latitude in interpreting federal law. An administration official, speaking on condition of anonymity to discuss pending litigation, defended the I.R.S. interpretation.

“Our position, at bottom, is that when Congress enacted the Affordable Care Act, it was creating a national solution to a national problem,” the official said.

Tim Jost, a law professor and health policy expert at Washington and Lee University, agreed, saying that by including a “federal fallback exchange” in the law, Congress clearly intended to extend tax credits to users of HealthCare.gov.

The seeds of the subsidy cases were planted as far back as December 2010, when Thomas P. Miller, a scholar at the American Enterprise Institute, convened a forum to explore legal avenues to undo the health law. By spring 2012, even before the Supreme Court had ruled on the constitutional challenge to the “individual mandate” — the requirement that nearly all Americans purchase insurance or pay a fine — Mr. Miller said he approached Sam Kazman, general counsel of the Competitive Enterprise Institute, about finding plaintiffs.

One plaintiff in the District of Columbia case, David Klemencic, the sole owner of a carpet and flooring store in the town of Ellenboro, W.Va., was also a plaintiff in the constitutional challenge to the individual mandate. In an interview, Mr. Klemencic, who does not have any employees, said he had deep, philosophical objections to any effort by the government to require him to purchase insurance, and would refuse to accept a subsidy even if eligible.

“I go to the doctor now, I go to the dentist now, I take my checkbook and I pay for it,” he said. “If I’m forced into some sort of program where it’s subsidized by the government, I won’t go see a doctor.”

Richard Pérez-Peña contributed reporting from South Bend, Ind.

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December 2, 2013

Insurers Are Offered Assistance for Losses

By ROBERT PEARNYT

WASHINGTON — The White House is offering more money to insurance companies as an incentive for them to let people keep insurance policies that were to have been canceled next year.

The administration floated several proposals on Monday to “help offset the loss in premium revenue and profit” that it said might occur if insurers went along with President Obama’s request to reinstate canceled policies.

Millions of people have received notices saying their policies were being canceled because they did not comply with minimum coverage requirements of the new health care law.

In a notice published Monday in the Federal Register, the administration acknowledged that insurers had a valid concern: They may be stuck with sicker, higher-cost customers in the new insurance exchanges because healthier Americans will stay on their existing health plans for another year.

Facing a political furor over the cancellation of insurance policies, Mr. Obama announced on Nov. 14 that he would temporarily waive some requirements of the new federal law and allow insurers to renew “current policies for current enrollees” for a year.

Insurers criticized the president’s move, saying it could upset the assumptions on which they had set premiums for new insurance products providing coverage in 2014.

Many people with serious illnesses were excluded from the old policies. As a result, the administration said, people on those policies may be healthier than average.

If they do not enroll in the new health plans, the administration said, the average cost of claims for people in those plans may be higher than expected, and this increase in costs could lead to unexpected financial losses for insurance companies.

To reduce this risk, the administration said it could provide financial assistance to certain insurers through a program under which the government will share in their losses and profits for the next three years.

Any such assistance would come on top of federal subsidies that the government plans to pay insurers to make coverage more affordable for low- and middle-income people under the new law. The Congressional Budget Office estimates that those subsidy payments will exceed $1 trillion over the next 10 years.

The administration said it could not immediately determine the cost of the assistance for insurers because it did not know how many people would stay in existing plans or how many would decide to enroll in new policies that provide additional benefits and consumer protections, as required by the 2010 health law.

Robert E. Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group, welcomed the proposal, saying, “We appreciate that the administration is taking steps to stabilize the market and minimize disruptions for consumers.”

But Jamie Court, the president of Consumer Watchdog, a liberal advocacy group, said the proposal was premature. “Insurers are already being paid by taxpayers for the vast majority of new enrollees,” he said.

The notice published on Monday includes proposals on several other issues. Certain health plans sponsored by labor unions would be exempted from new fees imposed on insurance companies and on many self-insured group health plans.

Labor unions have been lobbying for such an exemption, saying the fees could be “highly disruptive” to Taft-Hartley plans administered jointly by labor and management representatives in construction, entertainment and other industries.

But Republicans denounced the administration proposal. Senator John Thune, Republican of South Dakota, said it would provide “special treatment to President Obama’s political allies.”

The fees, to be levied from 2014 to 2016, will provide money to insurers that incur high-dollar claims for consumers in the individual insurance market.

The administration on Monday also reported a surge in the number of people using the website for the federal insurance marketplace, HealthCare.gov.

Julie Bataille, a spokeswoman at the Centers for Medicare and Medicaid Services, said that 375,000 people visited the website in the first 12 hours on Monday, about twice the normal traffic.

Because of the increase in demand, Ms. Bataille said, “we deployed a new customer queuing system, or waiting room, to help manage the traffic.” People will receive email messages inviting them to return to the site at another time when it is less busy.

The surge came just a day after the White House said the website was greatly improved and would “work smoothly for the vast majority of users.”

Jeffrey D. Zients, the presidential adviser leading efforts to fix the site, said Sunday that it could handle 50,000 users at a time. He reported that pages on the site were loading much faster, with a response time of less than one second and an error rate less than 1 percent.

But Ms. Bataille said federal officials decided to divert traffic from the website at a time when it had about 35,000 users on Monday. The performance of the site appeared to be faltering, as the response time exceeded two seconds and the error rate was nine-tenths of 1 percent, officials said.

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December 2, 2013

New F.C.C. Chief Promises He Will Protect Competition

By EDWARD WYATTNYT

WASHINGTON — The chairman of the Federal Communications Commission said on Monday that he intended to aggressively promote and protect competition in the telecommunications industry, including making sure that smaller mobile phone companies have a reasonable chance of buying public airwaves in auctions next year.

The chairman, Tom Wheeler, also said that the F.C.C. would continue to ensure that the Web remained fully open, allowing users “to access all lawful content” regardless of what company provides the Internet service.

“Regulating the Internet is a nonstarter,” he said. But, he added, “The Internet is not a law-free zone. It depends upon standards of conduct. And it depends on the ability of the government to intervene in the event of aggravated circumstances.”

The remarks, which Mr. Wheeler made at Ohio State University, his alma mater, are the first public outline of his priorities since he became chairman, and they signal his intention to take a combative stance against any efforts by the telecom giants to squash competition.

The protection of competition, Mr. Wheeler said, would apply to the coming auctions of additional airwaves, or spectrum, for mobile broadband. In April, the Justice Department told the F.C.C. that it could help to protect competition by ensuring that the two largest companies — AT&T and Verizon — were not allowed to use their financial might to buy up all the available spectrum being auctioned, shutting out smaller carriers.

But asked in a question-and-answer session after his speech whether he specifically favors restricting the ability of the biggest mobile companies to bid in the auctions, Mr. Wheeler said: “You’re going to have to wait for that answer. We’re going to come out with a rule that explains that.”

On the topic of the agency’s role in competition, Mr. Wheeler said, “It’s because of the F.C.C. that you have multiple competitive choices for your mobile phone service.” He noted that since the successful effort by the F.C.C. and the Justice Department to stop AT&T’s takeover bid of T-Mobile in 2011, T-Mobile and Sprint had attracted “significant investment capital to build out their networks and increase competition.”

While promoting competition, Mr. Wheeler also said that regulations should not be imposed where they are not needed. “I have zero interest in imposing new regulations on a competitive market just because we can,” he said.

For the last several years, the F.C.C. has pointedly refused to say that the market for mobile communications is competitive in an annual report that the commission makes to Congress.

He promised that the F.C.C. would not rush the development of the complex software needed to conduct the spectrum auctions, because it does not want its program to suffer the same experience as the Obama administration’s health care website.

Mr. Wheeler also stressed the agency’s commitment to enforcing its so-called Open Internet rules, which forbid Internet service providers from favoring their own content or paid content when allowing data to flow through their system. That policy, also known as net neutrality, is being challenged in federal court.

In response to a question, Mr. Wheeler indicated that he would not oppose some type of usage-based pricing, with Internet service providers charging so-called data hogs different amounts for service depending on how much data they receive and transmit. Those types of pricing plans have been strongly opposed by some consumer-protection groups.

Mr. Wheeler said variable pricing and service plans represented the effects of competition. “We might see a two-sided market,” he added, in which a company like Netflix might pay an Internet service provider to guarantee that Netflix customers get the best available transmission speeds.

Many of the chairman’s ideas and policies are discussed in a free e-book that Mr. Wheeler released Monday, “Net Effects: The Past, Present and Future Impact of Our Networks.”

Ukrainian President Viktor Yanukovych prevented a palace coup against his government on Tuesday. His party managed to see off a vote of no confidence initiated by opposition leader Vitali Klitschko. Yanukovych didn't even bother to show up to the turbulent debate.

When they heard that the opposition had lost the vote of no confidence on Tuesday, thousands of anti-government protestors gathered outside Ukraine's parliament in Kiev vented their anger wth deafening chants of "Shame, shame!" They had moved as close to the building as police roadblocks let them. Buses blocked the entrances to parliament, while a large contingent of police cordoned off a wider area.

Inside, the plans of the opposition leadership to force Yanukovych's prime minister, Nikolai Azarov, out of office went up in smoke. A total of 187 MPs voted for the motion of no confidence introduced by the alliance led by boxing world champion Vitali Klitschko. That was nine more than the 178 that had been pledged to the opposition before the vote. Even a member of Yanukovych's ruling Party of Regions voted against the government.

But the opposition missed the required vote count of 221 by a considerable margin. The Party of Regions remained loyal and defeated the motion. Its deputies all abstained from the vote -- with the exception of the one dissenter.

The president's camp thus succeeded in bringing most of the doubters in its own ranks into line in time. Shortly before the vote, it was revealed that the influential head of the presidential office would remain in his post after all.

Withdrawal from Resignation

Serhiy Lyovochkin had submitted his resignation at the weekend -- allegedly in protest at the forcible clearing of Independence Square on Friday night. The move had given the opposition hope that Lyovochkin would side with them against the government, and bring dozens of deputies along with him.

Nothing of the sort happened. Until Tuesday, there were still only two MPs who had publicly turned their backs on the Party of Regions. One of the two, Inna Bohoslovska, had held Yanukovych personally responsible for the police violence on Saturday. In an interview, she said that she was convinced Russian President Vladimir Putin was controlling Yanukovych through middlemen.

The government of Prime Minister Azarov, the architect of rapprochement with Russia, will remain in office. The plan by Yanukovych's opponents to first topple the cabinet and then the president himself through early elections failed at the first hurdle. Azarov waved as he thanked his MPs. Earlier, he had apologized to Ukrainians for the behavior of the police and also pledged changes to the government team, but nothing more.

If the vote of confidence had failed on Tuesday, it would have been a shining moment for Klitschko. The head of the Udar party had worked hard to secure votes for the initiative, even from the Party of Regions. "I demand the resignation of the government and for the head of the Interior Ministry to be held criminally responsible," the boxing world champion said. He also warned members of the ruling party that anyone who voted yes would hold "personal responsibility" for that decision.

A Trip to China

It's doubtful whether that will be enough to appease the demonstrators. After leaving parliament, Klitschko made a beeline for Independence Square, where he was greeted by some 10,000 people.

Afterward, columns of demonstrators headed towards the presidential office on Bankova Street. The night before, the beleaguered Yanukovych had blamed the police for the violent crackdown on the demonstrators.

The security authorities had "gone too far, and for that there is no excuse," he said in an interview. But the officials had been provoked, he added.

The president then called on the opposing camps to compromise. "I am certain that even a bad peace is better than any war," he said. Yanukovych stayed away from the heated parliamentary session. Very far away, in fact. The president paid a visit to China. He is expected back in Kiev on Friday. On the way home, he may make one more stop: in Moscow.

By skipping the OSCE meeting in Kiev this week, Europe can stand for democracy and Ukrainians' rights to peacefully protest

Steven Pifer theguardian.com, Tuesday 3 December 2013 14.15 GMT

Polish Foreign Minister Radek Sikorski tweeted on 30 November:

When police assault peaceful demonstrations, Kiev is hardly natural for a meeting of Organization of Security and _Cooperation_ in Europe.

— Radosław Sikorski (@sikorskiradek) November 30, 2013

Mr Sikorski is right. Europe's foreign ministers should boycott the December OSCE meeting (set to take place on Thursday and Friday) to underscore that Ukraine's government must observe OSCE's human rights norms, including the right to demonstrate peacefully.

The OSCE flows from the 1975 Helsinki Final Act. Among other things, that document lays out fundamental human rights, including "the effective exercise of civil, political … rights and freedoms", which signatory states have pledged to uphold. Signatory states normally meet once a year at the level of foreign ministers. As the 2013 OSCE chair-in-office, Ukraine has long planned an end-of-the-year ministerial meeting in Kiev.

This year's OSCE ministerial comes at a difficult and uncertain time in Ukraine. Protestors took to the streets of Kiev and other cities after President Victor Yanukovych's government announced on 21 November that it was "suspending" preparations to sign an association agreement with the European Union. On 24 November, about 100,000 gathered in Kiev, the largest demonstration the country has seen since the 2004 Orange Revolution.

Smaller protests kept going, including following President Yanukovych's 29 November meeting with European Union leaders in Vilnius at which he said that he wanted to sign the association agreement but could not do so now.

In the early hours of 30 November, the Berkut – a special Ministry of Interior police unit – attacked demonstrators in downtown Kiev's Independence Square, forcefully clearing them from the area. Kiev's police chief later claimed that he ordered the assault, but that strains credulity. Police captains in Ukraine do not take that kind of authority on themselves; the order had to come from much higher.

The Berkut assault generated a large public backlash. Demonstrations continued and grew larger on Sunday – by some accounts reaching 300,000 – in defiance of a hastily-issued court order banning protests in downtown Kiev. Protests carried over to Monday. With Saturday's attack, the possibility that the authorities might take further action against demonstrations, and rumors of a looming declaration of a state of emergency, Kiev is not the place to hold a meeting of OSCE foreign ministers.

Secretary of State John Kerry will not attend. While he reportedly informed Mr Yanukovych in October that he intended to come, the State Department said on 22 November – the day after Ukraine suspended its association agreement preparations – that he would not go due to a schedule conflict. His schedule likely was not the only reason he chose not to go.

Other European foreign ministers, particularly those of European Union member states, should follow Mr Sikorski's advice and make clear that they will not attend a ministerial in Kiev. They and Mr Kerry should propose instead that the meeting move to Vienna, home of the OSCE's permanent council.

Such an action would send a strong signal of disapproval to President Yanukovych over the use of force against anti-government demonstrators. It would reinforce the messages flowing out of Brussels, other European capitals and Washington about the need for the authorities to exercise restraint and permit peaceful demonstrations.

There are risks, moreover, in holding the ministerial in the Ukrainian capital. President Yanukovych's government undoubtedly would try to exploit the meeting to depict a false sense of normalcy and respect. Foreign ministers might also face a hugely awkward situation: they could be meeting while police clashed with demonstrators just a few blocks away. That would do OSCE's credibility little good.

If the meeting must be held in Kiev, OSCE states should send their ambassadors to OSCE's permanent council, without senior-level officials coming from home capitals. The ambassadors should make time on their schedules to meet with representatives of the demonstrators to reinforce the importance that protests remain peaceful and that the government let such demonstrations proceed unmolested.

Not all OSCE foreign ministers will stay away, of course. The Russian, Belarusian and Central Asian ministers would almost certainly attend. But the attendance of foreign ministers from countries in which democracy is under stress, coupled with the absence of ministers from the states that embrace OSCE's values, would in itself send a powerful message.

Democratic rights in Ukraine face a crucial test. Europe's foreign ministers should take a stand in favor of democracy and the political right of Ukraine's citizens to peacefully demonstrate. When it comes to the OSCE meeting in Kiev, they should stay home.

The top editor of the British newspaper The Guardian told Parliament on Tuesday that since it obtained documents on government surveillance from a former National Security Agency contractor, Edward J. Snowden, it has met with government agencies in Britain and the United States more than 100 times and has been subjected to measures “designed to intimidate.”

The testimony by the editor, Alan Rusbridger, gave a public airing to the debate over how to balance press freedom against national security concerns, an issue that became more acute once The Guardian began publishing material leaked by Mr. Snowden in June.

The American and British governments have said the disclosures, which detail how the National Security Agency and its equivalent in Britain, Government Communication Headquarters, gather vast amounts of data, damage national security and help hostile governments. Journalists and transparency advocates have countered that the leak spurred a vital debate on privacy and the role of spy agencies in the Internet age.

Mr. Rusbridger said Tuesday that the governments’ measures “include prior restraint,” as well as visits by officials to his office, the enforced destruction of Guardian computer disks with power tools and repeated calls from lawmakers “asking police to prosecute” The Guardian for disclosing the classified material in news articles.

As he testified before a Parliamentary committee on national security, he faced aggressive questioning from lawmakers, particularly those of the ruling Conservative Party. Some asserted that The Guardian had handled the material irresponsibly, putting it at risk of interception by hostile governments and others. Others said the paper had jeopardized national security.

At one point during the hearing, Mr. Rusbridger was asked, to his evident surprise, whether he loved his country. He answered yes, noting that he valued its democracy and free press. After Mr. Rusbridger’s testimony, a senior British police officer, Cressida Dick, refused to rule out prosecutions as part of an investigation into the matter.

Since the revelations, newspapers, particularly those that have dealt with Mr. Snowden’s material, have also had to adjust to a harsh new reporting environment, security experts and journalists said, as governments and others seek secret material held by reporters.

“The old model was kind of like your house,” said Marc Frons, the chief information officer of The New York Times. “You locked your front door and windows, but not your desk drawer, even if it had your passport inside. In the new model, you have locks on everything.”

The Guardian, The Washington Post and The Wall Street Journal declined to comment about internal security arrangements.

But Mr. Rusbridger told Parliament that the newspaper “went to more precautions over this material than any other story we have ever handled.”

Senior Guardian editors were initially skeptical this year when asked to hand over their cellphones before discussing Mr. Snowden’s documents, said a person with knowledge of the reporting process, who did not want to be named discussing confidential security procedures.

That soon changed when they reviewed the information Mr. Snowden had supplied, this person said. The documents, they came to realize, would be of intense interest not only to the American and British governments, from which they were taken, but also to other governments like China and Russia seeking an espionage edge and hackers seeking to embarrass either government agencies or the publications reporting on the material.

Eventually the same editors insisted that meetings be held in rooms without windows and that any electronic devices nearby be unplugged. Computers that contained the information could never be connected to the Internet. And reporters who needed to consult with colleagues in other countries about the documents had to fly them over physically and meet in person, despite the extra costs. On one occasion, Mr. Rusbridger said, encrypted documents were sent via FedEx.

Nicholas Weaver, a computer security researcher at the University of California, Berkeley, said effective countermeasures for all reporters covering such issues begin with first contact with a source.

Devices “leave fingerprints everywhere you go,” he said. “Leave all your high-tech gadgets at home; meet in a public location that’s kind of noisy, and wear a hat so you don’t get caught on camera.”

“You have to walk there, because we have this network of license plate readers now,” he said, or buy a transit ticket with cash and dispose of it afterward. As for making first contact with a sensitive source, Mr. Weaver said, “You have to wait for them to contact you.”

Communicating with existing sources, said Ashkan Soltani, a security expert and reporter who has worked with The Guardian, The Journal and The Post, should be done on a computer isolated from all other “promiscuous communications” like web browsing and downloading files, to avoid the secret installation of software to monitor activity.

“If the computers have malware, no amount of secure email, no amount of encryption is going to help,” he said.

The threat is not abstract: Several news organizations have been victimized by hacking in recent years. In 2012, Chinese hackers infiltrated The New York Times’s systems, seeking access to reporters’ inboxes.

The United States government, too, seeks access to email information involving news organizations. Several secret subpoenas to companies like Google for data related to accounts linked with WikiLeaks have surfaced.

But those briefed on security plans, and several recent reports, suggest that tech companies are also trying to resist the government’s drive for information.

This article has been revised to reflect the following correction:

Correction: December 3, 2013

An earlier version of this article gave an incorrect date for the seizure of telephone records from some Associated Press reporters by the Justice Department and when the company found out about the action. The phone records were seized in 2013, not 2012. The company did not find out for up to 90 days, not nearly a year.

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Guardian will not be intimidated over NSA leaks, Alan Rusbridger tells MPs

The Guardian has come under concerted pressure and intimidation designed to stop it from publishing stories of huge public interest that have revealed the "staggering" scale of Britain's and America's secret surveillance programmes, the editor-in-chief of the newspaper has said.

Giving evidence to a parliamentary committee about stories based on the National Security Agency leaks from the whistleblower Edward Snowden, Alan Rusbridger said the Guardian "would not be put off by intimidation, but nor are we going to behave recklessly".

He told MPs that disclosures from the files had generated a global debate about the powers of state agencies, and the weaknesses of the laws and oversight regimes they worked within.

"In terms of the broader debate, I can't think of a story in recent times that has ricocheted around the world like this has and which has been more broadly debated in parliaments, in courts and amongst NGOs," he said.

"The roll call of people who have said there needs to be a debate about this includes three presidents of the United States, two vice-presidents, generals, the security chiefs in the US [who] are all saying this is a debate that in retrospect we had to have."

During an hour-long session in front of the home affairs select committee, Rusbridger also:

• Said the Guardian had consulted government officials and intelligence agencies – including the FBI, GCHQ, the White House and the Cabinet Office – on more than 100 occasions before the publication of stories.

• Said the D-Notice committee, which flags the potential damage a story might cause to national security, had said that nothing published by the Guardian had put British lives at risk.

• Argued that news organisations that had published stories from the Snowden files had performed a public service and highlighted the weakness of the scrutiny of agencies such as GCHQ and the NSA. "It's self-evident," he said. "If the president of the US calls a review of everything to do with this and that information only came to light via newspapers, then newspapers have done something oversight failed to do."

• Asked why parliament had not demanded to know how 850,000 people had been given access to the GCHQ top-secret files taken by Snowden, who was a private security contractor.

Rusbridger said the Guardian had been put under the kind of pressure to stop publishing stories that would have been inconceivable in other countries.

"They include prior restraint, they include a senior Whitehall official coming to see me to say: 'There has been enough debate now'. They include asking for the destruction of our disks. They include MPs calling for the police to prosecute the editor. So there are things that are inconceivable in the US.

"I feel that some of this activity has been designed to intimidate the Guardian."

In one curious exchange, the committee chair, Keith Vaz, asked Rusbridger if he loved his country.

"I'm slightly surprised to be asked the question," replied Rusbridger. "But, yes, we are patriots and one of the things we are patriotic about is the nature of democracy, the nature of a free press and the fact that one can in this country discuss and report these things.

"One of the things I love about this country is that we have that freedom to write, and report, and to think and we have some privacy, and those are the concerns which need to be balanced against national security, which no one is underestimating. I can speak for the entire Guardian staff who live in this country that they want to be secure too."

At one point, the MP Mark Reckless suggested a criminal offence had been committed by sharing some of the Snowden material with the New York Times.

"You have I think Mr Rusbridger admitted a criminal offence in your response. Do you consider that it would not be in the public interest for the CPS [Crown Prosecution Service] to prosecute?"

Rusbridger replied: "I think it depends on your view of a free press."

He said the Guardian had not lost control of any of the documents and the newspaper had used "military-grade" encryption to safeguard the files.

"No data was lost, we lost control of no data. No names have leaked from the Guardian."

There was a testy set of exchanges between the editor and Michael Ellis.

The Tory MP asked Rusbridger about stories in the Guardian that revealed GCHQ had a Pride group. Ellis claimed this had endangered the security of GCHQ staff. "You've lost me," said Rusbridger. He said the details of the existence of the Pride group were publicly available on the internet.

The Guardian has published a series of stories about the mass surveillance techniques of GCHQ and its US counterpart, the NSA, over the last six months; two of the most significant programmes uncovered in the Snowden files were Prism, run by the NSA, and Tempora, which was set up by GCHQ. Between them, they allow the agencies to harvest, store and analyse data about millions of phone calls, emails and search-engine queries.

Rusbridger's answers referred to comments made to a parliamentary committee last month by the chiefs of Britain's three intelligence agencies – Sir Iain Lobban, the director of GCHQ, Andrew Parker, the director general of MI5, and Sir John Sawers, chief of MI6. The men had claimed that the Snowden revelations had damaged national security and that terrorists were likely rubbing their hands in glee.

Asked about this, Rusbridger said: "It is important context that the editors of probably the world's leading newspapers … took virtually identical decisions. This is not a rogue newspaper. It is serious newspapers that have long experience of dealing with national security.

"The problem with these accusations is they tend to be very vague and not rooted in specific stories."

Rusbridger then quoted senior officials from the UK and the US who "have told me personally that there has been no damage. A member of the Senate intelligence committee said to us: 'I have been incredibly impressed by what you have done … I have seen nothing that you have done that has caused damage."

Nick Pickles, director of Big Brother Watch, said: "Newspapers around the world, from the Guardian to the Washington Post and Der Spiegel, have done what our own parliamentary oversight committee and other oversight bodies failed to do: they exposed unprecedented surveillance being undertaken without the knowledge or approval of our elected representatives.

"Spies spy, but they should not be able to write their own rules, exploiting woefully out-of-date legislation to collect information on millions of innocent people.

"If the three intelligence chiefs had previously faced anywhere near as rigorous cross-examination then perhaps we would not have been so dependent on the Guardian and other newspapers to learn just how out of control surveillance had become."

Earlier today, the Watergate journalist and author, Carl Bernstein, wrote an open letter in which he said Rusbridger's appearance at the committee was "dangerously pernicious".

Bernstein said it was an attempt by the "highest UK authorities to shift the issue from government policies and excessive government secrecy in the United States and Great Britain to the conduct of the press".

"You are being called to testify at a moment when governments in Washington and London seem intent on erecting the most serious (and self-serving) barriers against legitimate news reporting – especially of excessive government secrecy – we have seen in decades," Bernstein wrote.

Yesterday the UN special raporteur on counter-terrorism and human rights, Ben Emmerson, announced he was launching an investigation into the surveillance programmes operated by GCHQ and the NSA.

He said the Guardian and other media organisations reporting the Snowden revelations had disclosed matters of genuine public interest and concern to states across the globe.

"The astonishing suggestion that this sort of journalism can be equated with aiding and abetting terrorism needs to be scotched decisively," Emmerson said. "Attacking the Guardian is an attempt to do the bidding of the services themselves, by distracting attention from the real issues."

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Alan Rusbridger and the home affairs select committee: the key exchanges

Guardian's editor-in-chief tells MPs that the publication of NSA files leaked by Edward Snowden was in the public interest

The Guardian's editor-in-chief, Alan Rusbridger, argued before the home affairs select committee that there was a public interest in revealing details of secret surveillance programmes based on files leaked by Edward Snowden, and said newspapers had played a vital role in exposing the scale and scope of British and American intelligence agency spying activities. Some of the exchanges from the hour-plus session of the home affairs select committee follow:

Public interest

Julian Huppert, a committee member, argued that the Snowden files "touched on issues which are of fundamental national importance ... and a whole range of things about the future of privacy in a digital age."

The LibDem MP said: "In Germany there is huge interest in this subject, in the US there is huge interest ... why do you think there has been so little interest here ... what we have seen is attacks on the Guardian rather than parliament trying to work out what the rules ought to be. Why do you think that is?"

Rusbridger said : "Shooting the messenger is the oldest diversionary trick in the book. My experience is that when you speak to people and explain the issues, they are deeply interested. I can't think of any story in recent times that has ricocheted around the world like this and which has been more broadly debated in parliaments, in the courts amongst NGOs.

"The roll call of people who have said there needs to be a debate about this includes three presidents of the United States, two vice-presidents, generals ... the security chiefs in the US are all saying this a debate that in retrospect we know that we had to have ...There are members of the House of Lords, people who have been charged with oversight of the security measures here. The former chair of the intelligence and security committee, Tom King, said this was a debate that had to be had and they had to review the laws. The director of national intelligence in the US said these were conversations that needed to happen. So in terms of the public interest, I don't think anyone is seriously questioning this – this leaps over the hurdles of public interest."

Oversight

Keith Vaz, the committee's chairman, asked Rusbridger if the Guardian had felt driven to publish the stories about surveillance because of the weakness of the oversight and scrutiny regimes over the intelligence agencies.

The Labour MP asked: "Are you telling this committee that as a result of parliament's failure to oversee the security services, and the failure to have the necessary expertise, and the failure to have a sufficient budget, that's why you were obliged to publish, otherwise nobody would have found out."

Rusbridger: "Well, the only way this information has come into the public domain has been through the press."

Vaz: "So we should look at our structures?"

Rusbridger: "We should and America is."

Vaz: "In respect of our counter-terrorism inquiry, do you think it would be good if we looked at the structures of oversight?

Rusbridger: "Absolutely. I think that would be an important thing to do."

An enigma

During one passage of hostile questioning, a Tory member of the committee, Michael Ellis, became so agitated he was rebuked by the committee chair.

Ellis: "You authorised files stolen by Snowden which contained the names of intelligence staff, to be communicated elsewhere, didn't you? Yes or no."

Rusbridger: "I have already dealt with that. It has been known for six months."

Ellis: "Do you accept that [the files] contained personal information could lead to the identity even of the sexual orientation of persons working within GCHQ?"

Rusbridger: "If you can explain how we have done that ..."

Ellise: "On August 2, you refer to the fact that GCHQ has its own Pride group. That jeopardises those individuals."

Rusbridger: "You have completely lost me, Mr Ellis. That there are gay people in GCHQ? Is that a surprise? ... The mention of a Pride group in GCHQ, you can find the same information on the Stonewall website. I fail to see how that outs a single member of GCHQ."

Choosing a historical comparison, the Conservative MP asked: "If you had known about the Enigma code in World War Two, would you have transmitted that information to the Nazis?"

Rusbridger: "That is a well-worn red herring, if you don't mind me saying so, Mr Ellis. I think most journalists can make a distinction between the kind of things you are talking about. I think we can make those distinctions."

Ellis: "Have members of the board of the newspaper conceded to you that the law may have been broken on this matter?"

Rusbridger: "No."

Vaz: "This needs to be your final question."

Ellis: "No, I think it is less than six minutes."

Vaz: "Mr Ellis, order, I am chairing this meeting. This is your final question."

Ellis: "This is not a Labour love-in."

Possible prosecution

Another Tory MP, Mark Reckless, also asked if the Guardian might face prosecution.

The MP asked: "I understand if you choose not to answer this question, but do you consider that you have communicated information on the identities of staff of intelligence agencies out of jurisdiction contrary to 58A of the terrorism act.".

Rusbridger said: "It has been known to the government for many months" that the Snowden files "included a good many documents that had names of security people working for both the NSA and GCHQ" that had been shared with the New York Times.

Reckless then asked: "Which you would accept constitutes communicating it outside the UK?"The editor-in-chief replied that "self-evidently they work in New York".

Seizing on this, the MP said: "You have, I think, Mr Rusbridger, admitted a criminal offence in your response just then. Do you consider that it would not be in the public interest for the CPS [crown prosecution service] to prosecute or should that be dealt with by the authorities in the normal way?"

Rusbridger: "I think it depends on your view of a free press, really. In America, the attorney general, Eric Holder, came out within the last two weeks and said that he had no intention of prosecuting Glenn Greenwald. We were sharing this material with journalistic colleagues on the New York Times in order to stimulate a debate which presidents and legislatures around the world think vital."

MPs asked how the Guardian had sent documents abroad. Rusbridger insisted this had only done so with care, and that documents had been subjected to military-grade encryption in case they were intercepted – but that hadn't happened.

He then compared the focus on the Guardian with the complete lack of scrutiny about how Snowden had managed to copy 58,000 secret documents – and why 850,000 other analysts had access to the same material.

Rusbridger: "We have spent 10 minutes in this committee discussing leaks that didn't happen. The catastrophic leak that did happen was dealt with by the intelligence and security committee with the following exchange.

'Chairman: "Can we assume you are having discussions with your American colleagues about the hundreds of thousands of people who appear to have access to your information?"

Head of MI5: "All three of us are involved in those discussions."

Chairman: "Thank you very much."'

"That is the only question that has been asked in parliament about the loss of 58,000 documents through a data-sharing scheme between GCHQ and the NSA. If that amounts to oversight … the budget for oversight is £1.3m, which is about one third of the amount that Cheltenham borough council spends on car parks."

Patriotism

In perhaps the most unexpected exchange of the session, Vaz asked Rusbridger if he loved his country – an apparent reference to critics of the Guardian who have accused it of weakening its security. Vaz asked : "You and I were both born outside this country, but I love this country. Do you love this country?"

Rusbridger: "I'm slightly surprised to be asked the question but, yes, we are patriots and one of the things we are patriotic about is the nature of democracy, the nature of a free press and the fact that one can, in this country, discuss and report these things."

Vaz: "So the reason why you've done this has not been to damage the country, it is to help the country understand what is going on as far as surveillance is concerned?"

Rusbridger: "I think there are countries, and they're not generally democracies, where the press are not free to write about these things, and where the security services do tell editors what to write, and where politicians do censor newspapers. That's not the country that we live in, in Britain, that's not the country that America is and it's one of the things I love about this country – is that we have that freedom to write, and report, and to think.

A committee of MPs challenged the existing system of oversight for the security services by asking the head of MI5 to justify his claims that the Guardian has endangered national security by publishing leaks from the former NSA contractor Edward Snowden.

In an unprecedented step, Keith Vaz, the chairman of the home affairs select committee, announced that spy chief Andrew Parker had been summoned to give evidence in public to the Commons committee next week.

The decision was taken at a private session of the select committee on Tuesday before the body heard evidence from Guardian editor Alan Rusbridger seeking to justify the Guardian's decision to publish a string of stories based on US and UK intelligence agency files leaked by Snowden to the media.

Although last month the security services appeared in public for the first time to give evidence to parliament, they appeared before the Intelligence and Security Committee (ISC). Members of that committee are appointed by the prime minister and tend to have defence or a security background. Commons select committees, by contrast, are parliamentary committees, with the chairs and members elected by MPs.

It is understood that the home affairs select committee rejected inviting Parker to give evidence in private. Julian Huppert, a Lib Dem member of the committee, said: "A precedent has been set and now that the heads of the security services have given evidence once in public they should do so again to us, and not just to MPs they would like to have ask them questions. I would expect Mr Parker to attend."

Labour committee member David Winnick also pointedly ridiculed the ISC referring to the way in which Britain's three main spy chiefs had been given prior notice of the questions in its first public evidence session last month. Some committee members want Parker to reveal how much MI6 and MI5 had told the ISC about its mass programme of surveillance, so in effect testing the value of the ISC as a constitutional check on the security services. Deep political divisions over the Guardian's publication of the Snowden files were exposed throughout the one-hour cross examination of the Guardian's editor, with Tory MPs rigidly focusing on whether the newspaper had broken the Terrorism Act by sending the names of UK agents abroad as documents were shared with the New York Times.

Cressida Dick, the Met's Assistant Commissioner who heads London's Specialist Operations unit, told the committee in subsequent testimony confirmed that the Metropolitan police was looking to see whether individuals had broken Section 58A of the Terrorism Act, saying she would go wherever the evidence took her. "It appears possible ... that some people may have committed offences," she said, but declined to specify whether the Guardian is under investigation.

Following the session Julian Smith, the Conservative at the helm of Tory criticism of the Guardian, went so far to accuse Rusbridger of treason. The MP said that Rusbridger had "admitted the names of British agents were in documents he could not bother to read, but he sent abroad to America. The Terrorism Act 2000 makes it an offence to communicate the names of the agents that protect us. It is for the police to take the decisions, but I hope he is prosecuted."

Rusbridger told the committee he did not know if the police were conducting an inquiry, but promised the paper would not be intimidated from publishing stories that it regarded were in the public interest. He said approximately 1% of the 58,000 intelligence files leaked by US whistleblower Snowden have been published by the paper. He had consulted government officials prior to the publication of every story, but one. He explained the files had originally been placed in four locations – with the Guardian, the Washington Post, a location in Rio de Janeiro and a location in Germany. "That's the hand of cards we were all dealt – The Guardian, security services and governments." Vaz referred to Parker's claim that the Guardian had gifted the terrorists the ability to attack at will, saying "this is severe criticisms of a kind I have not seen before from the head of our security services".

Rusbridger countered that "the problem with the accusations is they tend to be very vague and not rooted in specific stories" adding the publication of the NSA files "leaps over the hurdle of public interest". He said: "There is no doubt in my mind ... that newspapers have done something that oversight has failed to do".

He pointed to a series of senior UK and US officials that had described the Guardian's behaviour as incredibly responsible, insisting the Guardian was not a rogue newspaper, but acting in concert with other responsible newspapers to publish stories .

In possibly the most heated exchanges Conservative MP Michael Ellis insisted he would not be a party to "a Labour love-in", and asked Rusbridger, "if you'd known about the Enigma code during World War Two would you have transmitted that information to the Nazis?"

Ellis suggested to Rusbridger by using Fed-Ex to communicate some of the NSA files, containing the names of intelligence officers, he had committed a criminal offence. "It isn't only about what you've published, it's about what you've communicated. That is what amounts, or can amount, to a criminal offence," Ellis asserted.

"You may be a lawyer, Mr Ellis, I'm not, so I will leave that with you," the editor replied. He also pointed out "We have never used a single name. We have published no names and we have not lost control of any names". The files sent to the US were encrypted to military grade and had not been compromised, he said.

Ellis also clamed the Guardian may have exposed the identity of gay GCHQ staff, or GCHQ families that had been on a trip to Disneyland in Paris. Rusbridger pointed out the fact that there was a Pride branch of GCHQ was on the website of Stonewall, the gay rights pressure group.

At one point Vaz took an unexpected tack, asking the editor whether he "loved this country." A startled Rusbridger replied: "We are patriots and one of the things we are patriotic about is the nature of our democracy and of a free press. There are countries and they are not generally democracies where the press are not free to write about this and where the security services do tell editors what to write. That's not the country we live in, in Britain, and it's one of the things we love about the country.

Germany launched a new push to outlaw the NPD party on Tuesday amid doubts whether the legal bid will succeed, and whether a ban would significantly curb the country's violent far-right scene. But if the motion fails, right-wing extremism will flourish, analysts warn.

Germany on Tuesday made a fresh attempt to outlaw the far-right National Democratic Party of Germany as the country's 16 regional governments filed a motion with the Federal Constitutional Court. But doubts persist whether the court will rule in their favor, and whether a ban would significantly curb right-wing extremism in Germany.

The states argue that the NPD espouses a racist, violent ideology similar to that of Hitler's Nazi party and that it wants to overthrow the democratic order through militant action. A previous legal bid to ban the NPD failed in 2003 due to mistakes made in preparing the case. Officials say the new motion is more watertight.

"The ideology and the whole NPD party is xenophobic, inhuman, anti-Semitic and anti-democratic," said the interior minister of the state of Rhineland-Palatinate, Roger Lewentz of the center-left Social Democrats.

The motion cites an NPD brochure for party officials which states: "An African, Asian or Oriental can never be a German, because handing out printed documents (…) doesn't change their biological heritage. Members of other races will therefore (…) always remain foreign bodies regardless of how long they live in Germany."

The party also indirectly glorifies Nazi leaders including Adolf Hitler and Rudolf Hess, and trivializes Nazi crimes, say the backers of the motion.

The NPD refers to Allied bombing raids on Nazi Germany as the "Bomben-Holocaust." Its leader, Holger Apfel, is on record saying the Holocaust memorial in Berlin should be razed to the ground.

Turkish 'Sperm Cannons'

Mecklenburg's NPD leader Udo Pastörs was convicted of incitement to racial hatred and received a 10-month suspended sentence in 2010 for a speech in which he described Germany as a "Jew Republic," labelled Turkish immigrant men as "sperm cannons" and called US economist Alan Greenspan, the former head of the US Federal Reserve, who is Jewish, a "crooked nose."

Its members include people who belong to militant Kameradschaften, neo-Nazi groups bent on creating "nationally liberated zones" free of foreigners through attacks on immigrants and political opponents.

But Germany, mindful of abuses during the Nazi period, has high legal hurdles for outlawing political parties. The last party to be banned was the West German KPD communist party -- in 1956.

Many politicians remain skeptical that the court will rule against the NPD and are concerned that if it doesn't, the party would enjoy a repeat of the boost it got in 2003 when the last attempt to shut it down failed.

At the time, the Constitutional Court threw out the motion because some of the testimony was from government informants who held high positions in the party. That prejudiced the case, the court argued. The new motion doesn't rely on informant testimony and has a better chance.

But in a sign of how big the doubts are, Chancellor Angela Merkel's government and the Bundestag lower house of parliament declined to sign up to the motion.

The Constitutional Court has already made clear that mere similarity to the Nazi party won't suffice for a ban of the NPD. The key is to prove the NPD is working to destroy democracy through violence. But it may be difficult to prove that it constitutes a real threat, given its small size with just 5,400 members, and its weak national support of just 1.3 percent of the vote in September's general election.

'More Radical Than Nazi Party in 1920'

Hajo Funke, a leading analyst of the far-right scene, said the NPD is even more radical than the fledgling Nazi party when it comes to repatriating immigrants.

"It is a neo-Nazi party, it's racist, it's oriented towards violence, it needs civil war to get to the Fourth Reich," Funke told SPIEGEL ONLINE. "The repatriation program it pledged during the election campaign, to send back 10 million foreigners to their supposed home countries, that's more radical than the Nazi Party was in its founding manifesto in 1920 with regard to Jews. Today's it's against immigrants and of course against Jews as well."

"It's crystal clear that it's opposed to our fundamental order in an aggressive, miliant way. There are right-wing terrorists inside and outside the party. The party remains the center of gravity for violent right-wing extremism. But the court may rule that it doesn't pose a direct threat with electoral support of just 1 to 2 percent."

Bernd Wagner, the head of EXIT, a group that helps neo-Nazis who want to quit, agrees that the party has violent members. "Parts of the NPD are actively militant. If you look at rural areas and various organizational structures within the NPD, there are people who are highly militant to the point of extreme violence."

The court is expected to take one to two years to reach a decision. Anti-racism campaigners said the legal bid will help to keep debate about Germany's far-right alive now that public outrage over the NSU terrorist killings has subsided.

The murders of 10 people, mostly Turkish immigrants, between 2000 and 2007 by a group calling itself the National Socialist Underground came to light in 2011 and triggered enquiries into the failure of authorities to combat right-wing extremism, which has claimed almost 200 lives since 1990, according to some estimates.

No More Money

A ban would end the public funding the NPD is entitled to as a legitimate party. Its income is boosted by its representation in two eastern state parliaments -- in Saxony and in Mecklenburg-Western Pomerania -- and NPD members also have seats on town councils across Germany.

The NPD has been receiving some €300,000 in state funds per quarter but payments stopped following a Constitutional Court ruling last month because the NPD has yet to pay a €1.27 million fine imposed for irregularities in its account statement for 2007.

According to the online service of German public broadcasting's nightly TV news show Tagesschau, the party has received more than €20 million in state financing since 2003, when the last attempt to shut it down failed.

Wagner of EXIT, whose group has helped 514 people to stop being neo-Nazis since 2000, said that banning the NPD would be a blow to the far-right by depriving it of cash, legitimacy and a parliamentary platform.

"But I would warn against hoping that it would significantly push back the far right's scope to spread its message. It has found new ways to reach people with the Internet." Social networks have enabled groups to organize flashmobs and share far-right music, seen by authorities as a "gateway drug" for young people into neo-Nazism.

However, with the NPD gone, it would become harder for the far right to reach and mobilize ordinary people, as was seen this year with the NPD's heavy involvement in public protests against asylum seeker hostels in Berlin and Schneeberg, a town in the eastern German state of Saxony.

"It will always be possible to mobilize die-hard racists but there are also a lot of people who have been attracted by the NPD's claim to represent the interests of the little man, and its pledges to cut red tape, boost their living standards and tackle crime committed by foreigners," said Wagner. People like that will be harder to mobilize without the NPD's veneer of political respectability, said Wagner.

Ban Could Make Germany Complacent

Anetta Kahane, head of the Amadeu Antonio Foundation, a group that combats right-wing extremism, said she was opposed to a ban because it would lead to complacency.

"We've got enough bans, such as the ban on displaying Nazi symbols which I agree with, but outlawing the NPD will spare German society having to confront right-wing extremism," she said. "It won't solve a single problem. In fact it would be a sign of weakness. You wont get racism out of people's heads by banning the NPD. You've got to confront their attitudes."

Kahane said initiatives by politicians and anti-racism groups in the northeast of Mecklenburg-Western Pomerania, where the NPD is very strong, were starting to bear fruit.

She said that more educated people there "are less indifferent than they used to be, they're more active in confronting the far right. There's a great sense among people that they've got to become involved to stop Nazis becoming parent's representatives on school boards, for example."

The NPD has vowed to take the case to the European Court of Human Rights if the Constitutional Court closes it down. The court ruled in 2003 that a party must pose an "immediate threat" to democracy to warrant banning.

The NPD said on Monday: "The motion is an open assault on the right to form a free opposition and freedom of opinion, and therefore on two essential elements of democracy."

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SPIEGEL ONLINE12/03/2013 01:06 PM

Jailhouse Chic: Investors Remake Germany's Disused Prisons

By Stephan Degenhardt

As inmate numbers in Germany steadily decline, some states are selling off unneeded correctional facilities to private investors. The result is a new brand of high-end apartments, hotels and event centers housed in renovated former prisons.

Thomas Richter-Mendau, a 45-year-old private investor, recently gave a tour through the site of his latest high-end real estate project: a former prison in the northeastern German town of Stendal. He stood in the middle of the corridor, clutching his blueprints and kicking a bit of debris out of the way. "There, those two cells will be a bedroom," he said, pointing at two eight-square-meter (90-square-foot) recesses. He turned slightly to the left. "Those two will be made into a children's bedroom." Another turn. "Back there, we'll tear out the walls and put in a sliding door, make a big open-plan kitchen. Seems clear, right?"

Richter-Mendau continued through the former penitentiary. The tiled containment room for prisoners on suicide watch? That will become a living room with space for a big couch. The massive oak doors, numbered 1 to 98, that lean against the walls? "We'll put them in front of the new apartments. As a warning to people to behave!"

The saws that cut through the brickwork, over 100 years old, beneath the cell windows, reveals a view of nearby Stendal Cathedral. "With that view, I'd move in here right away," Richter-Mendau enthused.

Prospects are looking similarly good in many such former prisons. In cities across Germany, investors are converting disused jails into apartments, hotels or event centers. Just a few years ago, many German prisons were overcrowded, but now prisoner numbers are declining. About 79,000 people were serving sentences or detention 10 years ago, but last year that number was barely 66,000. Many of Germany's federal states are taking advantage of this decline to consolidate their inmates into a few large prisons.

That means the end for small facilities such as this one in Stendal. By the point the facility closed in 2010, only around 50 criminals were serving sentences there. In the last five years, Saxony-Anhalt has reduced its number of prisons by five, Berlin also by five, Baden-Württemberg by three, Hesse by one and Lower Saxony by a total of 11. In Saarland, two prisons closed their doors in 2011.

Challenges of Renovation

Most of the facilities being closed are located in rural areas. Many were built during the time of the German Empire and are both listed for historical preservation and in a fairly dilapidated state. Renovating them is expensive, which is where private investors such as Richter-Mendau come in. The businessman and his wife bought the Stendal prison, paying the state of Saxony-Anhalt €37,000 ($50,000) for this historical building of approximately 3,500 square meters. The plan is to convert the cells into 28 apartments, each 40 to 90 square meters in size. Richter-Mendau plans to invest over €2 million in the project.

Unlike Richter-Mendau, the new owners of a former prison in the southern state of Baden-Württemberg, want to keep a bit of the jailhouse look. Two local businessmen are converting this former jail in the town of Offenburg into a hotel. "Rather than orienting ourselves toward the traditional hotel standard, we want to preserve the prison structure," says architect Jürgen Grossmann. The doors to the hotel's 50 rooms will be barely 1.7 meters (5 feet 7 inches) high, forcing guests to adopt a humiliating posture when entering or leaving a room -- just as prisoners would have to do. The two businessmen have invested €5 million into these two red sandstone cellblocks, which were built starting in the mid-19th century, and plan to open their doors to their first hotel guests in 2015.

An old prison in the city of Kassel has already been used as a hotel -- last year, during Documenta, a high-profile international art exhibition.

One of the building's new owners is the lawyer Christopher Posch. Known for his role on a German TV program called "Ich kämpfe für Ihr Recht" ("I fight for your rights"), Posch came here often when the building was still a prison, to meet with his clients. Now, he points to a green-and-white exit sign. "First we had to label emergency exit routes," says the 37-year-old attorney. "Naturally, that wasn't necessary when this was a prison."

From Prison to Artist Hangout

Posch and his business partner changed almost nothing in the building's approximately 90 cells. Each contains a bed, a chair, a stool, a sink and a toilet in the middle of the room. They did change the locks on the doors, so they could be opened from the inside, and some cells got a new coat of paint from artists who stayed here during Documenta. By the end of the 100-day exhibition, Posch counted nearly 10,000 overnight stays.

The building, called "Elwe" -- the local dialect word for 11, the former prison's street number -- has become a desirable event location as well, and has hosted a tattoo show and a basketball tournament, as well as a celebration of Holi, a Hindu festival in which participants shower each other with colorful powder.

But not all attempts to repurpose former prisons have been as successful. A student union in Frankfurt am Main wanted to turn a former deportation center in nearby Offenbach into a student dorm, but pulled out of the project when costs rose to €1.3 million. And in the city of St. Ingbert, Saarland, the mayor wanted to move the city's music school into a former prison building, built in 1882, in the city center. But the city council was unwilling to approve the €260,000 necessary to purchase the building and the nearly €1 million necessary to renovate it.

These high renovation costs mean that small cities in particular are often forced to rely on private investors, and the interests of city governments and investors don't always align. This is the case in Eisleben, a city in Saxony-Anhalt that is both the birthplace and place of death of Martin Luther. The city government envisions converting its former women's prison, closed in 2009, into an inexpensive hotel for pilgrims. The building's current owner, however, has other possibilities in mind, and is currently in talks with various parties interested in repurposing the prison -- among them, the operator of an S&M club.

A German court has given a senior member of the country's main far-right party a suspended eight-month prison sentence for selling CDs featuring content glorifying nazism and inciting violence.

Berlin municipal court convicted Sebastian Schmidtke, head of the National Democratic party's Berlin branch, of offences including incitement and displaying the symbols of anti-constitutional organisations – a charge that covers banned Nazi paraphernalia.

The court on Wednesday found that a shop owned by Schmidtke sold music CDs with lyrics that stirred hatred against Jews, foreigners and gay people, called for violence, and used banned slogans glorifying nazism. It says Schmidtke, who can appeal the ruling, denied selling CDs in his shop.

Germany's 16 state governments this week launched a drive to have the country's highest court ban Schmidtke's party.

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Kindertransport, 75 years on: 'It was fantastic to feel free at last'

Survivors recall their experiences of the scheme that took 10,000 Jewish children away from Nazi Germany to safety in Britain

In December 1938, Kristallnacht had just rocked Nazi Germany. The pogrom killed an estimated 91 Jews, burned hundreds of synagogues and left tens of thousands imprisoned in concentration camps. Many historians see the day as the start of Hitler's "final solution".

Amid the horror, Britain agreed to take in children threatened by the Nazi regime. The operation was called Kindertransport, or Child Transport in English.

Seventy-five years ago this week, the first group of children arrived without their parents at the Essex port of Harwich, and took a train to London's Liverpool Street station.

Some 10,000 children, most Jewish, would escape the Nazis in the months to come until the outbreak of war in September 1939, when the borders were closed.

From London, the children went to homes and hostels across Britain. But their parents, the few who eventually made it over, were placed in camps as "enemy aliens".

After the war, many of the children settled in Britain, their families having been murdered by the Nazis.These are the stories of five of those children.

Oscar Findling, 91

Already 16 when he arrived in June 1939, Findling, who grew up in the eastern German city of Leipzig, is the oldest surviving child from the Kindertransport. He had a career in garment manufacturing and now lives with his second wife in London.

My father was not a German citizen. On the night before Kristallnacht, he was arrested by the Gestapo. That was the last I saw of my father. As soon as we found out (about the Kindertransport), my mother went to where the committee was and put my name down. She wouldn't put my brother down because, she said: "I don't want to lose both my sons on one day". I'll never forget the last words my mother said: "Will I ever see you again?" Prophetic words. I was two years in a hostel in Manchester. The committee got me a job in a fur shop. Once I was over 18 I was allowed to go to London. In 1944 I got papers from the Ministry of Labour that I had to go in the army. It took me 30 years to get my parents' story together. Basically they were put in the ghetto in 1941 and in September 1942 ... they were all put on the cattle trains. They were sent to a place called Belzec, which was one of the well-known gas chambers near Treblinka. And that was that.

Herbert Levy, 84

Levy came from Berlin via the Netherlands in June 1939. Months later, his parents joined him. They were interned in a British camp for "enemy aliens". Levy, who recalls being greeted with chants of "Bloody Germans!", went on to become an actor. His wife, Lillian, survived the Bergen-Belsen concentration camp.

My parents had tried to get out of Germany for many years but it was very difficult to get into anywhere until the British government allowed children to come on the Kindertransport. My parents applied, and by pure luck I was one of the chosen ones. I was not yet 10 years old. My parents took me to the station. I said goodbye to my grandparents. My grandfather was to die a few weeks later. My grandmother was one of the 6 million people who died in the extermination camps, with her two sisters, many cousins, many nephews and nieces. We finally arrived at the border. You can't imagine the relief of being in Holland, to have passed Nazi Germany. It was fantastic to feel free at last.

The Rev Francis Wahle, 84

Wahle and his younger sister Anna left Vienna in January 1939. He was an accountant before studying for the priesthood. Although now retired from his parish, he still works as a priest. Wahle's parents fled their home as the Gestapo came to arrest them; they went underground, living without papers for three years. Wahle's father went on to become the most senior judge in Austria.

Hitler marched into Austria in March 1938. Until that time I was just an ordinary Catholic. I then discovered that I was Jewish as far as Hitler was concerned, because all my four grandparents were Jewish. My parents tried to get us out. As we had relations in Italy, the first attempt was to get us out to Italy, but they never got all the right papers. So we started learning English. I was 9 ½ at the time. It was dreary that journey through Germany until we came to the Dutch border and then the ladies provided the kids with soft drinks and a bit of cake. My sister and I were split up. I was very lucky. I was taken to a place in Sussex. A lady had let the committee have her very large place for the refugees. I stayed there until 1940. At that time a new regulation came in that enemy aliens, and of course we were classed as enemy aliens, were not allowed to be within so many miles of the coast because we might be spies. And so we had to leave. I was taken on for free by the Jesuits in a boarding school. Having escaped death really, and my parents having escaped death, it's made me immensely grateful to God, and I suppose the fact of becoming a priest is the result of that.

Ruth Barnett, 78

Barnett's father was Jewish but her mother was not. She arrived in February 1939 with her older brother Martin. Having worked as a psychotherapist, she speaks today in schools about the Holocaust and seeks to highlight the fate of both Jews and the hundreds of thousands of Gypsies killed by Hitler.

I was only four when I came to England so I have snatches of memory. My dad was a judge in Berlin. He was summarily sacked when the Nazis came into power in 1933. He did get out and he went to Shanghai, which was awful because of the war between Japan and China. Our mother came with us on the train because being a proper Aryan German she could get a visa. So I experienced it as a family outing. I remember saying: "Are we nearly there? Are we nearly there?" My mother had to go back to Germany. She would have been an enemy once war broke out. She brought us to our first foster family, which was a vicar and his wife in Kent. The vicar was a lovely man, but his wife obviously didn't want refugees foisted on her. She was very cruel to us. The second foster family ... had five children and they treated us exactly the same as their children. But where we were living there was in the path of the doodlebugs [German bomber planes], and that absolutely fazed my brother Martin, so we had to be moved. Our third family was on a farm. I was in seventh heaven with the animals. I had no nationality for the first 18 years of my life. The Nazis ... took away citizenship from all the Jews and Gypsies. I had to travel on a document that was a sheet of paper with "person of no nationality" written across the top. It had such a deep effect on me.

Eve Willman, 80

Willman, an only child, pictured above holding a copy of her 1939 German passport, arrived from Vienna in April 1939. She later obtained a PhD in biochemistry and worked as a researcher and biology teacher. She lives in London.

I was five when I came. My father was a doctor. My mother converted to Judaism when she married my father. I came with another girl who was older than me. The only thing I remember about the journey is stopping at one point and people coming in and giving us a sweet drink. I don't remember saying goodbye to my parents. My first foster home was with a Unitarian minister and his wife. They didn't have any children. I remember that she was very strict and precise. My uncle and aunt were later established in West Hartlepool. I went there for a holiday. It was such a wonderful turning point in my life somehow. My aunt said: "When you come back, you will be with us forever". I was 11. I became one of their children. My cousins became my brother and sister. My father survived the war. My mother was able to work and she worked in a factory, and the factory was bombed. She was killed just before the end of the war so I never saw her again. It was really a wonderful thing that the government did to let 10,000 children in who probably would have lost their lives. But it's happening again. It isn't happening to Jews, but look at the children in Syria.

Denmark is one of the best countries for working families. US and UK take note

Denmark's universal nursery care is worth emulating, as is the Danish cultural norm of giving kids a lot of responsibilities

Nicola Witcombe theguardian.com, Tuesday 3 December 2013 12.30 GMT

Imagine taking 23 children, who range in age from three to six years, on a sledding trip. There are three adults to supervise them, but the children have to take responsibility – more or less – for putting on their own snowsuits, their hats and their gloves, and for taking turns so there are no accidents. A health and safety nightmare? Perhaps, but an illustrative example of the pre-school childcare culture in Denmark – a country lauded for its great universal nursery care and parental benefits.

Every child, for example, is guaranteed an affordable nursery place from the age of one to when school starts at six. Parents and caretakers are generally permitted 52 weeks paid leave after the birth or adoption between them, and this can be taken flexibly. For example, my husband and I took one month's leave together and saved a month, which one of us can take before our youngest is nine years' old. Over and above this, working hours are less on average than elsewhere in Europe, you get five weeks' statutory holiday and are safe in the knowledge that you can have a day off to look after your children if one of them is sick. All these rules – and others – make Denmark a place where families can theoretically win the battle between work and life.

Beyond the legal rules, there is a culture that makes it possible for such a system to function. On the whole, society finds it acceptable that pre-school children are looked after by a professional – some of whom have completed a three-and-a-half-year degree – rather than a parent. The job of a "stay-at-home-mom" is, in some sense, taken over by the state.

More importantly, perhaps, is the fact that everyone seems to accept that children should be given as much freedom and responsibility as possible. An often cited Danish phenomenon is the daily excursion where children walk to play parks or museums two-by-two, or holding on to a pushchair which contains the youngest of the bunch. There are numerous other examples that illustrate the emphasis of autonomy and taking responsibility that are less well known and are less likely to live up to American ideals of proper child supervision.

Take the use of open fires used to toast "snobrød" and candles to create a cosy atmosphere. In one case, there was no fence or hedge in a yard to keep the children from wandering off – "one child who wandered off luckily chose to go towards the woods and not the motorway!" All these things can of course still be beneficial to children in their development, but might not sit comfortably in cultures which all too often see such freedom as risk.

The "pedægogerne" (nursery nurses) are not expected to be looking at your child constantly and would not physically be able to do so. There is no fast rule about the number of adults per child. Every afternoon at my son's nursery, there are two staff to look after 23 children between the ages of three and six. According to the National Institute of Public Health, the vast majority of accidents that happen to children still occur in the home, so there does not appear to be grounds to believe the low adult-to-child ratios are dangerous. Parents also understand that staff are public servants who are accordingly overstretched.

Because "free play" is the main pedagogical principle, close supervision is in any event not required at all times. Most Danish children are self-starters when it comes to playing. They find the most wonderful and innovative ways of learning all by themselves, often with few resources: drawing a treasure map where X marks the spot, girls making sticky name badges for all the boys or groups creating a 'play' to perform to others.

The emphasis here is, of course, on the child being self-sufficient and a member of a group – dressing and sitting at the table properly, and being a good playmate. Adult-led, structured activities occur but are relatively infrequent. Again, this seems a far cry from the American focus on didactic activities at every turn, even when watching television.

So, it is not only the legislated rules and expenditure that has made Denmark one of the best for working families. Two other vital factors include the almost universal acceptance of an element of risk, and the concept of free play. If America were to consider introducing more accessible childcare mirrored on the Danish model, it would certainly have some questions to answer first, like "would I allow my three-year-old child to go sledding with minimal supervision?" And if so, who's supposed to remember his gloves?

Spain loses as many points as Libya after political and royal graft allegations, with only Syria faring worse

Agenciestheguardian.com, Tuesday 3 December 2013 13.50 GMT

Spain has slumped 10 places to rank 40th in a global index of perceived official corruption after a spate of scandals hit its ruling centre-right party and the royal family, watchdog Transparency International (TI) said.

The Corruption Perceptions Index for 2013 found Spain to be the second biggest loser of points along with Gambia, Mali, Guinea-Bissau and Libya. The only country to tumble further was Syria, which is almost four years into a civil war.

Spain's five-year economic slump, which has forced it to adopt tight austerity laws, exposed how cosy relations between politicians and construction magnates had fed a disastrous housing bubble.

The former treasurer of the governing People's party (PP) told a judge he had channelled cash donations from construction magnates into leaders' pockets, and was found to have stashed €48m (£40m) in Swiss bank accounts. Iñaki Urdangarin, the king's son-in-law, was also charged this year with embezzling €6m in public funds.

"What the economic crisis has done is allow more public debate about corruption … It is being exposed more and that affects perceptions. In Spain every sector – politics, the royal family and companies – was implicated in graft at a time when the country is really suffering," said Anne Koch, TI's director for Europe and Central Asia.

The scandals also highlighted a lack of accountability in political parties and even the watchdogs charged with keeping them clean. This prompted lawmakers to react to public outrage and draw up Spain's first freedom of information law.

Spain had been the only European Union nation without a law guaranteeing citizens a right to information on how public funds are spent, but Koch said the new law was inadequate.

TI ranked 177 countries in 2013, placing New Zealand and Denmark joint first. Those two countries were also deemed the world's least corrupt in 2012, as well as Finland. Somalia, North Korea and Afghanistan again tied for last place.

The Berlin-based institute measures perceptions of graft rather than actual levels because of the secrecy that surrounds most corrupt dealings. Greece remained the European Union state with the worst perceived level of corruption, although its four-point gain to 40 points helped it rise to 80th place from 94th in 2012.

The biggest improver was Burma, which emerged from 49 years of military rule in 2011. The south-east Asian state gained six points, moving it up the rankings from 172 to 157.

Among the large global economies, the United States ranked 19th and China 80th, both unchanged from last year. Russia improved slightly to joint 127th place, from a previous 133rd, and Japan slid one spot to 18.

Allegations that leaders of Spain's PP, including prime minister Mariano Rajoy, took backhanders, and the investigation into a member of the royal family are particularly damaging to Spain's reputation as they involve such central institutions, according to Fernando Jiménez, a lecturer in political sciences at Murcia University. "The problem in Spain is the political reaction … Very few people resign here," he said.

He contrasted the Madrid government's slow response to the illegal financing scandal in the PP with Germany, where cabinet ministers stepped down after comparitively less serious allegations that they had plagiarised their academic theses decades earlier.

On the same day the damning corruption figures were released, Madrid welcomed figures showing the number of people registered as unemployed in Spain fell by a little under 2,500 in November - the first drop in that month since the current system was introduced in 1997. The decline provided further evidence that the Spanish economy might be picking up after more than two years of recession, which only ended in the third quarter.

Spainhas around 4.8 million people out of work, representing about 26% of its total workforce. Only Greece has a higher unemployment rate in the 17-country eurozone.

A report into the deaths of two of the most senior Royal Ulster Constabulary officers killed during the Troubles has concluded that there was collusion between Irish police officers and the IRA.

The Smithwick tribunal, which was set up in 2005 to investigate allegations of collusion by gardaí, or a civilian in the force, has found that members of An Garda Síochána collaborated with the IRA in the Louth-Armagh border region to set up the assassination of Chief Supt Harry Breen and Supt Bob Buchanan in March 1989. The RUC policemen were the highest-ranking officers to die at the IRA's hands during the Troubles.

Mr Justice Smithwick said that "on the balance of probabilities" collusion did occur but he did not identify any individual member of the Garda.

Three members of the Garda have repeatedly denied allegations in the Irish media that they played any role in the killings.

Breen and Buchanan were shot dead after a leaving a joint top level RUC-Garda conference on security in Dundalk. It discussed how to target IRA smuggler and then chief of staff of the Provisionals Thomas "Slab" Murphy.

Buchanan's son, William Buchanan, a bank official in Northern Ireland, praised Smithwick's work and said: "The findings are both incredible and shocking and confirm the existence of a mole in Dundalk station. This led to my father's death."

Alan Shatter, Ireland's justice minister, apologised on Tuesday for any security failings Irish state forces were guilty of in relation to the double murder.

"The killings of Harry Breen and Bob Buchanan on the afternoon of 20 March 1989 were two stark examples of the brutality which pervaded this island for many dark years. Both left behind loving families, friends and colleagues. Even with the passage of 24 years and the positive developments which have taken place on the island since, our condemnation of their murder should be as strong today as it was then. I believe that it is important to say immediately, on my own behalf and that of the government, that I apologise without reservation for any failings identified in the report on the part of the state or any of its agencies."

He added: "It is also right today to acknowledge that during the course of the troubles on this island An Garda Síochána in co-operation with their colleagues in Northern Ireland played a vital role in safeguarding the institutions of the state and protecting the people of these islands, sometimes at great cost to individual members. Nothing in the report should detract from that.

"I have no doubt that the brave men and women of An Garda Síochána down through the years would be as appalled as anyone that any member of the force would betray them and the Irish people by offering assistance to terrorist organisations.

"Regrettably, to this day the gardaí continue to have to confront the challenge posed by paramilitary organisations who reject the democratic will of the Irish people.They have the full support of myself and the Irish government in discharging that onerous task, in full co-operation with their colleagues in the PSNI."

However, Unionist politicians warned that there could be implications for new talks aimed at resolving some of Northern Ireland's political impasses.

Arlene Foster, a Democratic Unionist party minister in Northern Ireland's executive, said: "This must act however as a catalyst for further movement towards acknowledgement by the Irish government of the role played by Dublin in the formation of the IRA and how republican terrorists were able to operate across the border with relative ease."

Theresa Villiers, the Northern Ireland secretary, said she would raise the collusion scandal with the Irish government, adding: "An important point to remember is that levels of co-operation between An Garda Síochána and the PSNI are now at unprecedented levels and are playing a crucial part in combating terrorist attacks in Northern Ireland."

Smithwick and his team have spent years investigating allegations of collusion between the IRA and individual gardai in the 1989 murder. The tribunal has heard from 200 witnesses in 122 days since 2005, including testimony from a British double agent within the IRA known as Kevin Fulton, several leading gardaí and a number of ex-RUC colleagues.

Fulton, who comes from the south Armagh area, told the tribunal that an IRA colleague had informed him the organisation knew via a Garda mole about the presence of the RUC officers in the Irish republic on the day of the killings.

Once a shining example for Michael Gove Sweden has now recorded the largest drop in maths performance over 10 years

Richard Adams The Guardian, Tuesday 3 December 2013 20.11 GMT

Sweden's education system has often been cited by Michael Gove as a role model, especially for its policy of state-sponsored free schools providing increased choice for parents. In 2008 Gove told the Conservative party conference that Sweden's school reforms would be introduced if he was in government – and in 2010 promptly did so, with the advent of free schools.

A few years later and Sweden's star has dimmed. The 2012 Pisa results show Sweden's exam results falling abruptly across all three measures of reading, maths and science – with the country recording the largest drop in maths performance over 10 years. Anna Ekström, head of Sweden's National Education Agency, said in response: "The bleak picture has become bleaker with the Pisa review that was presented today."

Dr Susanne Wiborg of London's Institute of Education said: "The Swedish free schools have played an indirect role in the decline of the Pisa scores over the last decade. However, the question still remains to what extent these schools actually can be blamed for this."

In recent months a number of for-profit companies running free schools in Sweden have been in financial difficulties, while a recent TV exposé revealed that the state-funded privately-run schools were prepared to bend selection rules to admit bright pupils.

Sweden's education minister, Jan Björklund, said the Pisa results were "the final nail in the coffin for the old school reform," and speculated that the central government could take over running schools from Sweden's municipalities.

Britons who were advsied to buy property with Swiss franc mortgages must lodge their case before the end of the year to stand a chance of making a claim

Harriet Meyer theguardian.com, Wednesday 4 December 2013 12.01 GMT

Thousands of Britons who bought property in Cyprus with Swiss franc mortgages are being urged to submit claims for mis-selling, ahead of a deadline at the end of the year.

Between 2003 and 2010, Cypriot banks suggested buyers take out a mortgage in Swiss francs because the interest rates were lower, but this advice backfired when the franc soared after the financial crisis, and mortgage repayments doubled.

Lawyers say that the banks often failed to explain the potential risks of currency fluctuation that could cause repayments to rise, and also applied heavy interest rate rises.

This has resulted in property owners facing unsaleable and unlettable apartments, gigantic loan obligations and negative equity following the collapse of the Cypriot property market.

Those who think they may have been mis-sold a product must act quickly, as claims have to be filed in Cyprus by 31 December, or they are likely to fail outright, said Duncan McNair from Cubism Law in London. He said British purchasers of properties had almost €2bn of loans outstanding to Cypriot banks.

"Commonplace features that I am dealing with are a failure to advise on the risks of foreign currency mortgages, serious misrepresentations as to the property itself, and dubious powers of attorney – as well as unhealthily close relationships between the banks, developers and selling agents," he said.

If you think you have been affected, speak to an experienced English lawyer familiar with the situation to immediately file protective claims, in England first (asserting your wish to have your claim heard in England in preference to the Cyprus courts), then in Cyprus.

"These claims must be filed in time and in the proper form," McNair said. Those who fail to make a submission can expect to lose the right to claim at all in Cyprus, which risks enforcement by the bank against their UK as well as their Cyprus assets.

Central banks around the world are pumping trillions into the economy. The goal is to stimulate growth, but their actions are also driving up prices in the real estate and equities markets. The question is no longer whether there will be a crash, but when.

When 42-year-old hedge fund manager Mark Spitznagel wants to forget about his high-stakes business for a while, he heads to the goat farm he and his wife Amy purchased in the bucolic hills of Michigan. There, he produces cheese according to environmentally sustainable methods, because he views modern agriculture, with its large-scale pesticide use and automated factory farms, as degenerate. In fact, he says, factory farming is "an ideal metaphor" for the economy.

In Spitznagel's view, the world's financial and equities markets are also dysfunctional, and what happens there is unhealthy and anything but sustainable. As a money manager, he has also opted for an alternative business model of sorts: He's betting on a crash.

For his customers, Spitznagel's multi-billion-dollar fund acts as an insurance policy against the next meltdown in the financial system. When the market is doing well, they lose modest amounts of money. But they cash in as soon as prices take a nosedive, even when all other investments are going up in smoke.

The hedge fund manager has made a lot of money in the past with his prognoses, and he is convinced that substantial turbulence is on the cards for the near future. "The setup is there for it," says Spitznagel.

'It Might Go Badly'

Since the last crisis, central banks around the world have pumped trillions into the economic cycle, both by lowering interest rates and buying up securities in the markets. For central bankers like United States Federal Reserve Chairman Ben Bernanke, the aim of the policy was to stimulate the economy and rescue banks that could no longer raise capital elsewhere. But this "grand monetary experiment," as Spitznagel calls it, has side effects. Because it makes borrowing cheaper than even before and saving all but pointless, it encourages investors to pursue reckless deals. Share prices are exploding on stock exchanges around the world, while real estate prices are rising at an alarmingly fast pace. And many US companies are now in as much debt as they were before the financial crisis.

To take Spitznagel's metaphor a step further, the flood of money coming from central bankers acts like a highly aggressive, artificial fertilizer. It generates enormous yields in the short term, but eventually leads to potential devastation.

For this reason, the ongoing party in the stock and real estate markets is beginning to feel uncanny to a growing number of observers. "It might go badly," Nobel laureate Robert Shiller told SPIEGEL. Some economists are even convinced that the question is no longer whether the next crash is coming, but when.

For brokers on the venerable trading floor at the New York Stock Exchange, such predictions are hugely exaggerated. "This is not a bubble," says Peter Tuchman, who has worked on Wall Street for almost 30 years and, with his white, Einstein-like hairstyle, half a dozen bracelets and well-worn running shoes, is a legend on the floor. He taps his smartphone a few times and pulls up a graph depicting the S&P 500 index of stock prices for 500 large companies, which has gone up by 166 percent since it hit rock-bottom in 2009. "This is a stable development," says Tuchman, pointing to the graph, which is directed uniformly upward. In his view, these are simply good times following on the heels of years of crisis. "There are new company listings every day," he says. "That is a good sign to me."

It's the first Thursday in November, the day of the Twitter IPO, and the jocular trader is completely in his element when a nine-year-old girl in a tulle dress and actor Patrick Stewart, who played Captain Jean-Luc Picard on the "Star Trek: The Next Generation" series, ring the traditional opening bell.

At 9:45 a.m., during the initial pricing phase, the Twitter share price jumps from $26 (€19) to more than $40. At 9:54 a.m., Twitter is trading at about $42 a share, and at 10:49 it's at $45.10. "If you bought the stock yesterday evening and sell it today, you'll have earned a return on investment of more than 70 percent," says one of Tuchman's fellow traders, with a note of awe in his voice.

Twitter hasn't made any money yet, nor does it have a convincing idea of how it will do so.

Other tech stocks are also doing extremely well, just as they were in the heyday of the New Economy. Amazon's share price has almost doubled in two years, while electric car manufacturer Tesla has gained 300 percent in market value in the same period.

"It is a complete joke," says hedge fund manager Spitznagel. He explains that the market is driven by investors' confidence that prices will continue to rise in the future. He says it is "a self-reinforcing process entirely disconnected from economic reality."

A Hunger for German Stocks

For many people, what Spitznagel is describing is typically American. In the heartland of capitalism, the crash has been to economic life what the Colt gun was to the Wild West. In Germany, on the other hand, centuries-old family businesses operating in brick-and-mortar factories make sophisticated tools, machines and systems, with which real, palpable, everyday products are made in the rest of the world. One would think that prices would be more down-to-earth in such a grounded environment.

Dürr AG, which makes machine tools in Germany's southwestern Swabia region, is one of those traditional companies. In business since 1895, Dürr is a supplier to automakers, as well as the chemical and aviation industry, and it manufactures production and environment technology systems -- a thoroughly solid product line.

But Dürr's share price has doubled within a year and increased fourfold in the last two years. A share of Dürr stock costs €66 today, whereas it could be had for less than €4 in 2009.

That's because international investors are hungry for securities like Dürr shares, which embody the successful model of Germany's export economy. It's also because companies like Dürr benefit from growth in emerging economies, and because their operations are in Germany and not in one of the crisis-ridden countries of the euro zone.

This demand has driven the MDAX, a German stock index for mid-sized companies, from 11,400 to 16,300 points within a year. The index is currently almost four times as high as it was during the stock market boom in 2000, far outperforming the DAX itself, an index of Germany's 30 largest companies -- although the DAX is also breaking one record after the next.

Germany is a hot commodity among investors, in both the equities and real estate markets. Prices for single-family homes and condominiums in major cities like Munich, Hamburg, Frankfurt and Cologne are rising faster than rents, a sign that speculators are pushing their way into the market. Buyers are from Germany, Italy, Eastern Europe and Asia, and they are buying German real estate because they believe that by investing in "concrete gold," they can protect themselves against the dangers of inflation.

This buying frenzy creates potential trouble spots around the world. Real estate prices in major Chinese cities have increased by more than 20 percent in only a year, wealthy foreigners are snapping up luxury property in Istanbul, and in the United Kingdom the government is giving an additional boost to the economy by offering a special loan program for homebuyers.

In the last 12 months, real estate prices in the United States have gone up more than they have since 2006. Some cities, like San Francisco and Las Vegas, have even seen price increases of 24 to 27 percent. Ironically, the last crisis began in the overheated US housing market.

'Ignoring the Risks'Some economists seek to allay fears by noting that the real estate market still has a long way to go before it reaches the levels that triggered the last crash, and that prices are still averaging 50 percent lower than they were then. But who says that you have to reach the most inflated point in the last crisis before a dramatic downturn sets in? And at what point does a solid growth trend turn into unhealthy hype?

"There are two types of bubble," says economic historian Werner Abelshauser, "the classic and the modern type." The mother of all classic bubbles was the market euphoria that took hold in the United States in the 1920s and came to an abrupt end on Oct. 24, 1929, known as Black Thursday. "From maids to taxi drivers, people were intoxicated with the idea that an age of never-ending prosperity had begun. They bought refrigerators and cars, as well as stocks, frequently on credit," says Abelshauser.

Black Thursday was followed by a Black Monday and a Black Tuesday. Within a few days, the benchmark Dow Jones index had lost a third of its value.

In the late 1990s, with the advent of the Internet age, investors believed once again that new economic laws applied and that growth rates would continue to rise. The term "New Economy" was coined. Once again, people who barely knew what a share was began trading in the market, even scrambling to buy shares in companies with nothing more than a vague prospect of ever turning a profit.

The New Economy bubble burst when the first of these companies were unable to fulfill overinflated expectations, and when several cases of fraud came to light.

A Blind Eye to Excessive Hype

Even Abelshauser, a prudent man with gray hair and a somewhat skeptical look in his eyes, lost money in the stock market at the time. What fascinates Abelshauser even more than the phenomenon of a bull market propelled by milkmaids and dentists is the second type of speculative bubble: one based on the new methods of financial mathematics, and the mad belief that risks can be largely overcome with sophisticated financial products.

The first such crash occurred in 1987, as a result of misguided speculation in financial derivatives, followed by a second crash in 2008. This time the culprits were banks, which had sugarcoated the numbers on subprime mortgage loans and sold them in large numbers.

Instead of eliminating investment risk, the modern mathematical models only increased investors' willingness to take risks, causing them to turn a blind eye to excessive hype.

Another phenomenon has also been around since the 1970s: debt management policy. After the oil shocks and the economic crisis they triggered, governments tried to jump-start their economies by borrowing and spending more. "The more money that is injected into the economic cycle, the more room there is for speculative bubbles," says Abelshauser.

Today central banks, especially, have encouraged the flow of capital with their extremely low benchmark interest rates and financial bailouts for banks and governments.

But the situation becomes dangerous when even the massive sums central banks are pumping in the economy don't lead to a rise in consumption and corporate investment. Economists like Carl Christian von Weizsäcker of the Max Planck Institute for Research on Collective Goods in Bonn, Germany see evidence of a global investment bottleneck, noting that too few factories are being built and not enough new products developed. This is offset by the growing mountain of savings aging Western societies are accumulating as a safeguard for the future.

Exacerbating a Problem

It's a misguided approach, though. The consequence of a high savings rate and a low investment is a decline in interest rates. Insurance companies and pension funds come under great pressure to invest their customers' assets in ways that are at least somewhat profitable. The flood of money coming from central banks only exacerbates the problem.

Central bankers claim they will be able to use the tools of monetary policy to extract the money from the global economy once again -- at just the right time and in the right amounts. At times, it almost sounds as if they were the ones who were trying to use numbers to obscure the risks.

But the danger is real, and the only question is how far prices on financial markets have already strayed from fundamental values.

The problem is that every expert comes up with a different answer. "It is a bit tricky," Nathan Sheets, global head of international economics for US-based Citigroup, says of the situation in bond markets. Low interest rates make borrowing cheaper than ever. US companies alone, by issuing bonds to willing investors, have borrowed money at a faster pace this year than ever before. If central banks decided to stem the flow of money, painful corrections could ensue.

Sheets is less concerned about prices on US stock markets. "There are a large number of firms that are extremely profitable and internationally competitive, with strong balance sheets," he says.

Concerns over the Bull Market

Hedge fund manager Spitznagel, for his part, cites a simple indicator to substantiate his concerns over the bull market: Tobin's Q, named after its inventor, Nobel laureate James Tobin. Roughly speaking, Tobin's Q indicates how high a company's market value is in comparison to all of its assets.

Instances when this ratio has been high in the past have always been followed by a crash at some point, says Spitznagel. Tobin's Q is now extremely high in the United States.

In many places, it has become difficult to cite corporate profits as justification for rapidly rising share prices. This doesn't just apply in the glamorous world of US technology stocks, but also in the rock-solid Mittelstand, the term used to describe Germany's small and medium-sized companies. On the MDAX, for example, the average ratio of share prices to corporate profits is at an all-time high. It would take almost 27 years for the companies to earn what investors are paying for their stock. And even though analysts are predicting declining profits, share prices continue to rise.

Still, market psychologist Joachim Goldberg does not see a bubble forming in the German stock market. He too believes that a rise in the market only becomes dangerous when large numbers of people get caught up in the hype.

But there can be no question of that today. "This is perhaps the most-hated bull market I've ever experienced," says Goldberg, who used to work for Deutsche Bank and now runs his own firm in Frankfurt, where he studies what influences investors in making their decisions.

People noted that prices were rising, but at the same time they heard economists warning against the risks, says Goldberg, including the euro crisis, the interest rate turnaround or whatever the admonishers felt was the greatest threat at a given moment. For that reason, he explains, many private investors tend to be skeptical.

Plenty of Potential Problem Spots

But even Goldberg is concerned. "People prefer to invest in things with which they haven't had any negative experiences, such as the real estate market in Germany," he says.

Germans are also avidly investing in Bitcoin, the virtual currency that rose above $1,000 for the first time last week. In early October, one Bitcoin was still worth less than €200. The volume of the currency is limited by a complex algorithm, which also drives up the price.

"The same prophets who were advocating investing in gold until recently are now pushing the Bitcoin," says Goldberg. The behavioral scientist almost succumbed to the temptation himself recently. "I wanted to invest, but I hesitated for a day, and the price almost doubled the next day," Goldberg says with a chuckle.

The irritation he felt afterwards is what typically leads to speculative bubbles, says Goldberg. "When people see how their neighbors are getting rich with apparently no effort at all, and the psychological strain resulting from lost profits becomes too great, they begin ignoring the risks and jump on the bandwagon."

Will the next conflagration erupt online, with the collapse of an artificial currency that most people still see as a gimmick dreamed up by a few Internet nerds? Or perhaps in the art market, which has attracted speculators who fancy themselves art aficionados?

These niche markets are probably still too small to set off a global quake. Still, there are plenty of potential trouble spots.

Hedge fund manager Spitznagel, at any rate, is convinced that the next crash isn't far off. "We don't know where it is going to start," he says, "It won't be pretty."

RBS, Citigroup and JP Morgan among banks fined by European commission for colluding to fix yen Libor and Euribor rates

Jill Treanor theguardian.com, Wednesday 4 December 2013 11.54 GMT

The interest rate rigging scandal was reignited on Wednesday as the European commission levied a record €1.7bn (£1.4bn) fine on five major banks and a broking firm – including bailed-out RBS – for colluding to fix crucial benchmark rates.

Joaquín Almunia, the European competition commissioner, warned that further fines were on the cards as three banks and one broker had refused to settle on other claims being investigated by Brussels.

"This will not be the end of the story," said Almunia, who added that foreign exchange markets were also facing an investigation for potential manipulation.

The record-breaking fines – the first to be levied on a financial cartel – cover yen Libor and Euribor, the European equivalent of the rate set in London, and follow fines by financial regulators in the UK and US for attempts to manipulate the key interest rates.

"What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other," said Almunia.

For the first time two US banks – Citigroup and JP Morgan – were named in the interest rate scandal while other banks that had already been fined received fresh penalties. Royal Bank of Scotland will pay another £300m on top of £390m already handed over to US and UK regulators, adding to its public relations difficulties following a systems meltdown earlier this week and recent allegations, which it denies, that it has abused its small business customers.

Sir Philip Hampton, the chairman of RBS, said: "Today is another sobering reminder of those past failings and nobody should be in any doubt about how seriously we have taken this issue. The RBS board and new management team condemn the behaviour of the individuals who were involved in these activities. There is no place for it at RBS."

Barclays – the first bank to be fined for Libor rigging in June 2012 when it paid £290m – avoided another £570m fine for blowing the whistle on a cartel in Euribor while the Swiss bank UBS escaped a £2bn fine for exposing the cartel in yen Libor rigging. The Swiss bank has already been fined £940m for offences related to the manipulation of the key benchmark rate.

The commission said the Euribor investigation focused on the period between September 2005 and May 2008 and the settlement involved Barclays, Deutsche Bank, RBS and Société Générale. In yen Libor the banks involved in one or more of the infringements are UBS, RBS, Deutsche Bank, Citigroup and JP Morgan. The broker RP Martin facilitated one of the infringements by using its contacts with banks involved in settling Libor.

At a press conference to announce the fines, Almunia said more penalties would follow as some of the firms it had been investigating had failed to settle. "We would have preferred all the parties would have been ready to settle – it is easier for them and for us. Three banks and one broker informed us they were not ready to settle," he said.

This appeared to be a reference to Crédit Agricole, HSBC and JP Morgan in relation to Euribor and the money broker Icap in relation to yen Libor.

JP Morgan said it had reached a €79m settlement over yen Libor but would defend itself against allegations of wrongdoing in relation to Euribor.

"Today's decision sends a clear message that the commission is determined to fight and sanction these cartels in the financial sector," Almunia said. "Healthy competition and transparency are crucial for financial markets to work properly, at the service of the real economy rather than the interests of a few."

The commission said these were the first two decisions concerning cartels in the financial sector since the start of the financial crisis in 2008

Britain's newly appointed chargé d'affaires has travelled to Iran in the first diplomatic visit by a UK envoy since London severed all but nominal ties with the Islamic republic two years ago after the storming of its embassy in Tehran.

In a significant move towards upgrading bilateral relations and the eventual goal of reopening embassies in respective capitals, the UK's foreign office last month named the head of its Iran department, Ajay Sharma, as its non-resident chargé d'affaires for Iran. Tehran also named Mohammad-Hassan Habibollahzadeh as Sharma's counterpart.

Speaking about the meeting, Sharma said: "I had a good first visit back to Tehran today and want to thank the Iranian authorities, particularly my counterpart Mr Habibollahzadeh, for facilitating the trip. I held detailed and constructive discussions with the Iranian ministry of foreign affairs about taking forward our bilateral relationship on a step by step and reciprocal basis. I also visited our embassy compounds to assess the damage caused in 2011.

"I intend to visit Iran regularly to continue the step by step process of improving relations between our two countries."

Habibollahzadeh told state news agencies in Iran on Tuesday that Sharma was due to visit British diplomatic compounds in Tehran upon arriving in the Islamic republic.

"In the first step, the British non-resident chargé d'affaires will travel to Tehran on Tuesday along with a delegation to visit [the UK's diplomatic] facilities and holdtalks with the Iranian foreign ministry's officials," Habibollahzadeh was quoted as saying by the state Irna news agency.

"In the next phase, I will travel to London as part of a delegation to assess the situation of the Islamic republic's [diplomatic] buildings and study ways to improve consular services to Iranians," he told Irna, adding that he will also hold direct talks with British officials.

Sharma, who has previously served as deputy head of UK's mission in Tehran, participated in the nuclear negotiations in Geneva last month which ended with a historic agreement between Tehran and six world powers.

The embassies still remain closed in London and Tehran and Sharma is based in the UK but is given the task to regularly travel to Iran.

In November 2011, an angry mob stormed the British embassy in Tehran and its separate residential compound, the Qolhak Gardens. The attacks provoked a diplomatic crisis between Tehran and London with the UK immediately withdrawing all diplomatic staff from Tehran and ordering the expulsion of Iranian diplomats from the UK, shutting down Tehran's embassy in London.

Iran's foreign ministry at the time issued an apology, implying that the attack happened without the knowledge of the government. Whether the mob had high-level backing from the authorities is still unclear but Iran's supreme leader, Ayatollah Ali Khamenei, also reprimanded those who took part, saying their activity "was not right". Four commanders of Iran's informal Basij militia who were involved in the embassy attack were dismissed.

Since the election of Hassan Rouhani as Iran's new president, replacing hardliner Mahmoud Ahmadinejad, and last month's historic agreement struck in Geneva, Tehran and London have embarked on the road to restored diplomatic ties.

David Cameron spoke to Rouhani on the telephone a few weeks ago, becoming the first British prime minister to hold direct talks with an Iranian president in a decade

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Iran deal: salute the power of patient diplomacy

The engagement with Iran confirms a seriousness about negotiation long absent that could furnish a key for Syrian peace talks

Observer editorial The Observer, Sunday 1 December 2013

'No matter what you think of it, this is a historic deal," Vali Nasr, dean of the Johns Hopkins School of Advanced International Studies told the New York Times last week, describing the interim accord in Geneva with Iran over its nuclear programme. "It is a major seismic shift in the region. It rearranges the entire chess board."

It is not only that the map of the Middle East might be transformed. There is a wider significance. The fact of any agreement between Iran and a group of world powers led by the US, after three decades of intense friction, is a significant achievement for diplomacy at the end of a period where the default position for so long has been to use American military power to solve problems.

After the years of "war-war", "jaw-jaw" – international diplomacy – is back on the menu. In the words of a US foreign policy adviser last week: "We've shifted from a very military face on our foreign policy to a very diplomatic face."

Although Barack Obama has been much criticised in certain circles for his use of drone warfare, the desire for rapprochement with America's opponents has long been a motivating factor, even if it has not come to much until now.

His campaign pledge from 2008 to reach out to America's enemies and speak to any foreign leader without preconditions, reiterated in his speech at Cairo's al-Azhar university in 2009 when he pledged a new relationship with Muslims, has floundered on the rocks of the Arab spring, the continuing war on terror, and beneath an avalanche of domestic and global economic problems. Obama promised, too, to press the reset button with Russia. The reasons for the failure to realise that ambition are more obvious: the first was the perception that Washington and its allies did not play straight in getting Moscow to sign up for a UN resolution authorising military intervention in Libya on humanitarian grounds, which they turned into a justification for regime change, anathema to Putin and Russia.

Exacerbating that problem were growing differences over the war in Syria and Moscow's bridling at the high-handed negotiating style of Hillary Clinton, America's top diplomat.

Given these antecedents – and the opposition of two US allies, Israel and Saudi Arabia – scepticism that any deal could be done with Iran was, perhaps, inevitable. But now a deal has been done, what does that tell us about this new diplomatic moment?

The reality is that there are lessons to be learned both for the US and for its allies, not least the foreign policy of the prime minister, David Cameron.

Diplomacy, about which more cynical quotes exist than any other pursuit except save, perhaps, for journalism, is long winded and risky, full of compromises, gruelling and often lacking in glamour. It often requires, in dealing with apparently intractable problems, more than a bit of luck – a coincidence of personalities and circumstances and a willingness to leverage those opportunities.

Over Iran, those circumstances came together with the election of Hassan Rouhani as president of Iran, the emergence of new war-weariness in the west after the years of war, and in the shape of the EU principal load carrier in the talks in the shape of Baroness Ashton, as indefatigable as she is low profile and discreet. It is worth noting, too, that Israel's clumsy and intransigent foreign policy under prime minister Binyamin Netanyahu made a deal easier by effectively writing its own objections ever further out of consideration.

While we have seen so far but a hint of a future and fuller detente with Iran, which may not happen, given the difficulties involved, the interim deal changes the mood music in international affairs far beyond the Middle East.

The engagement with Iran confirms a seriousness about negotiation long absent that could furnish a key for Syrian peace talks in a conflict destabilising an entire region. It sets up a transparent process that also – tantalisingly – offers the opportunity for Washington and Moscow to work constructively together.

If there is a lesson for the UK's often confused, lacklustre and predominantly mercantilist foreign policy, which often appears more interested in drumming up business at any cost, denuded of any moral dimension, it is that there are issues worth grappling with in their own right, where hard work in the long run, not the knee-jerk recourse to bombers, can produce results. Indeed, David Cameron's foreign policy pronouncements appear too often to have swung between two poles: between hasty and empty grandstanding, over the EU financial integration and Syria, and seeking to dodge difficult issues, including Sri Lanka over human rights and China and Tibet. It is not only that a middle way is necessary, but that it should have substance.

And the style of the Iranian diplomacy, not least the revelation last week that it was also in part the result of a secret line of communication between Washington and Tehran opened in August, confirms Geoffrey Howe's dictum, aimed at Margaret Thatcher in 1985, that "megaphone diplomacy leads only to a dialogue of the deaf". After a decade of threats of war and bellicose rhetoric and mutual mistrust on both sides, the small step forward has been made by talking.

"We're testing diplomacy; we're not resorting immediately to military conflict," Obama said, defending the interim Iran deal last week, building on a theme he expressed earlier in the day: "Tough talk and bluster may be the easy thing to do politically but it's not the right thing for our security."

And that in the end is the most important issue. The legacy of a period of elective wars designed to bringing stability has been ever more war and ever more instability. As war has failed, diplomacy has become a possibility again.

The events of the last week and more have underlined an important principle in international relations – that negotiation, even of the most drawn-out and problematic kind, can deliver incremental progress on apparently intractable problems.

It is a reminder that disarmament negotiations are always a process, rarely an end in themselves, and always preferable to military action. For that reason alone, all parties to this process should be congratulated.

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White House warns Congress not to undermine Iran nuclear deal with more sanctions

By Agence France-PresseWednesday, December 4, 2013 7:13 EST

The White House warned Congress that passing new sanctions on Iran — even with a delayed launch date — would give Tehran an excuse to undermine an interim nuclear deal.

White House spokesman Jay Carney also warned a bipartisan coalition of senators who are suspicious of the pact reached last month and want to pile up more punishments for Tehran, that their move would be seen as a show of “bad faith” by U.S. partners abroad.

The White House stepped up its rhetorical push to forestall new sanctions amid intense behind-the-scenes lobbying by top Obama administration officials targeting key lawmakers from both Democratic and Republican parties.

“Passing any new sanctions right now will undermine our efforts to achieve a peaceful resolution to this issue by giving the Iranians an excuse to push the terms of the agreement on their side,” Carney said.

“Furthermore, new sanctions are unnecessary right now because our core sanctions architecture remains in place, and the Iranians continue to be under extraordinary pressure.

“If we pass sanctions now, even with the deferred trigger, which has been discussed, the Iranians and likely our international partners will see us as having negotiated in bad faith.”

Carney argued that the passage of new U.S. sanctions — even with a built-in six-month delay contemplated by hawks on Capitol Hill — would threaten the unity of the international coalition that has leveled punishing sanctions on Tehran.

He also said if the interim deal — which freezes aspects of Iran’s nuclear program in return for a slight easing of the sanctions that have crippled the country’s economy — is not translated into a final pact that Iran abides by, the White House would support new sanctions against the Islamic Republic.

Barack Obama’s domestic opponents have seized on the terms of the deal to claim that it enshrines the right of Iran to enrich uranium but the White House late Tuesday issued a statement which sought to clarify the scope of any eventual final nuclear deal with Tehran.

Bernadette Meehan, a National Security Council spokeswoman, said that the United States did not recognize that Iran has “a right to enrich” and that such a right was not included in the deal reached between Iran and six world powers in Geneva last month.

“We are prepared to negotiate a strictly limited enrichment program in the end state, but only because the Iranians have indicated for the first time in a public document that they are prepared to accept rigorous monitoring and limits on scope, capacity, and stockpiles,” she said.

“If we can reach an understanding on all of these strict constraints then we could have an arrangement that includes a very modest amount of enrichment that is tied to Iran’s practical needs and that eliminates any near-term breakout capacity.”

Breakout capacity is the time needed for Iran to manufacture a nuclear bomb if it decided to do so.

US intelligence assessments suggest that the Islamic Republic’s leaders have yet to take such a step.

While some reports billed the White House statement as a major concession on enrichment, Obama has all along argued that his aim in the negotiations is to ensure that Iran does not develop a nuclear weapon and that Tehran could retain some verifiably peaceful civilian nuclear program.

By implication, that means Iran could end up with some limited capacity to enrich, albeit well below the purity levels needed to produce a weapon — as long as its actions are proven to be peaceful and subject to airtight monitoring.

Israeli Prime Minister Benjamin Netanyahu, who has vehemently criticized the Geneva deal, has however called for a complete end to uranium enrichment in all its forms by Iran. Hawks on Capitol Hill in both political parties back his stance.

However, more pragmatic analysts in Washington argue that such a “perfect” deal is out of reach and would not be politically viable in Iran.

In the end, the key to a permanent deal may be some kind of diplomatic formula that allows the West to argue that Iran has made major concessions and rolled back its nuclear program to make the swift production of a weapon impossible and for Iranian negotiators to be able to proclaim to their domestic constituencies that they did not formally renounce the “right” to enrich uranium.

Several groups of Republican and Democratic senators are working to reconcile various different sanctions measures, believing that they would strengthen Obama’s hand in negotiations.

Under the deal reached between world powers and Tehran to freeze Iran’s nuclear program last month, Washington committed to “refrain from imposing new nuclear-related sanctions” for the six months during which world powers will seek to hammer out a comprehensive settlement.

Carney, however, would not say whether Obama would use his presidential veto to halt any congressional effort to impose new sanctions.

The Taliban have urged the Afghan president, Hamid Karzai, to turn a delay in signing a long-term security deal with the United States into outright rejection, in an unusually polite statement directed at a leader the insurgents have repeatedly denounced as a US puppet.

Karzai last month called a national assembly to vote on the bilateral security agreement (BSA) and then shocked most of the country, including some of his closest advisers, by ignoring the advice of the handpicked group that he sign as soon as possible.

The deal would allow US forces to stay on past the 2014 end of the current combat mission, and seal billions of dollars a year in funding for the Afghan police and military. Karzai's delaying tactics stirred widespread condemnation from many in the Kabul elite worried about how the country would fight the Taliban without foreign funds or back-up.

The Taliban on Monday offered the Afghan leader rare, if somewhat grudging, support for his position so far, but also demanded that he abandon all conditions and reject the pact unilaterally.

"Karzai, the president of the Kabul administration, apparently conditionally refused to sign the BSA," the emailed statement from spokesman Zabihullah Mujahid said. "If he truly understands the real (situation), he should reject it without conditions, from a sense of Afghan spirit.

"The decision of the Afghan nation is clear: they don't want any occupier in our homeland."

The insurgent group's statement came on the day Iraq's foreign minister visited Kabul and admitted that his country still needs "continued US support" to combat widespread sectarian violence, even though it turned down a deal for long-term military support two years ago.

The last American soldiers pulled out of Iraq in 2011 after the two countries failed to agree a pact similar to the one Afghanistan is now being offered. The sticking point was Baghdad's refusal to grant immunity from Iraq law to US troops.

"Our expectation of the government of Afghanistan is to sign the BSA with the US, because Afghanistan needs US support," Tolo television station quoted minister Hoshyar Zebari telling Afghan journalists.

Karzai has said he will not sign the BSA until after a presidential election to choose his successor next year – he cannot stand again – and recently listed a range of new demands, from an immediate halt of all raids on foreign homes to the release of all Afghan prisoners held at Guantanamo day.

The US has said that the negotiations are finished, and Karzai must make a decision by the end of the year, to allow time for planning either a troop departure or the shape of the follow-up presence, expected to be around 8,000 to 10,000 US forces and a smaller number from Nato allies.

If the deal is not signed, all foreign soldiers will leave when the current combat mission ends in 2014, and most of a promised $8 billion a year in military and development aid is likely to vanish. A still-weak army that relies on foreign training and back-up would be on its own in the fight against the Taliban.

Karzai's close advisers, including spokesman Aimal Faizi, have said they do not believe there is really a "zero option" of withdrawing all troops, and the US is trying to intimidate a poorer, weaker ally.

But US politicians, diplomats and analysts warn that after years of mostly outfoxing his foreign backers when the Afghan war was a top policy priority, Karzai may have severely miscalculated the mood in an economically strained US, and a White House distracted by other international crises from Syria to China.

Tensions between the United States and Afghanistan flared up further in the past few days after a Nato airstrike killed a young boy in Helmand province. The Afghan leader's office said that attack was a betrayal of a promise by US President Barack Obama that his forces would respect Afghan civilians as they do their own citizens.

At the weekend Karzai also accused the US of cutting off fuel supplies to the police and army in a bid to force him into signing the pact. The Nato-led coalition denied any halt in flows of diesel or gasoline vital to patrols and military operations against the Taliban.

"We are aware of a statement on the Afghan presidential website concerning issues with fuel provisions for the Afghan National Security Forces (ANSF)," spokesman David Simons said in an email. There has been no stoppage in the delivery of requested fuel and we continue to process all orders as soon as they are received from the ANSF."

According to the office of the Special Inspector General for Afghan Reconstruction, the American government paid more than $1.1 billion to fuel the Afghan army from 2007 to 2012, the Associated Press reported. It plans to spend more for fuel until 2018, but only if a security deal is signed.

The polls are expected to serve as an indication of how Indians will vote in next year's national elections

Associated Presstheguardian.com, Wednesday 4 December 2013 10.28 GMT

Millions of residents in India's capital queued up on Wednesday to cast their votes in city polls that are expected to provide an indication of how Indians will vote in next year's national elections.

The incumbent Congress party's top elected official, chief minister Sheila Dikshit, was seeking a fourth consecutive term in the 70-member Delhi assembly. Opposing her were the main opposition Bharatiya Janata party and the fledgling Aam Aadmi (Common Man's) party.

Security was tight, with 65,000 police officers and additional paramilitary troops on duty to prevent any outbreak of violence at the more than 11,000 polling stations across the capital.

Nearly 12 million residents were expected to vote in a poll that analysts say is expected to show a trend for the three parties heading into next year's national elections in the world's biggest democracy.

The nine-month-old AAP, led by Arvind Kejriwal – a former tax official turned anti-corruption crusader – was threatening to tale voters from the two main parties.

In recent weeks, an army of AAP volunteers has trudged through the alleys of the city's poorest neighbourhoods to try to tap a deep vein of dissatisfaction that has gripped New Delhi residents, particularly over corruption and a soaring cost of living.

The BJP's campaign highlighted runaway inflation, increasing crimes against women and shortages of power and water in the city of nearly 17 million people.

"It is time for the Congress to quit," said Harsh Vardhan, the BJP's candidate for the chief minister's post.

He appeared to voice concern about a possible spoiler role for the AAP, saying a vote for Kejriwal would be "a wasted vote".

Dikshit stressed her party's development agenda over the past 15 years, citing the city's popular subway system, numerous overpasses and environmental efforts as among the achievements of her tenure.

On Wednesday,Dikshit and Sonia Gandhi, the chief of India's ruling Congress party, voted at a polling station in central New Delhi. They showed their inked fingers to television cameras, appealing for citizens to come out and vote.

Their appeal appeared to work in the poorer neighbourhoods of the capital, where people crowded polling stations. The turnout in the more affluent pockets of the city, however, was low.

While Dikshit was confident her party would win again, analysts said the 76-year-old Congress veteran's chances could be stymied by her party's ebbing support.

In recent months, prime minister Manmohan Singh's government has been hit by a slew of corruption scandals, adding to public anger over its failure to push through much-needed economic reforms to revive a slowing economy.

The BJP appeared ready to cash in on the Congress party's woes.

"We are very confident," the BJP's candidate, Harsh Vardhan, said. "It's going to be a hands-down victory for the BJP."

Kejriwal urged people to vote in large numbers. "It's the people's election," he told reporters after he voted. "We have put everything we have at stake. Now it is up to the people to decide."

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December 3, 2013

A Eunuch in India Campaigns as a Political ‘None of the Above’

By ELLEN BARRYIHT

NEW DELHI — A rinky-dink political parade was winding through the back streets of northwest Delhi on Sunday afternoon, past narrow alleyways and a clutch of pigs, ferrying along a candidate in heavy makeup and a blue sari.

One could have looked right past her were it not for a certain bulge to her forehead, a squareness to her jaw or the fact that her campaign slogans, chanted by a group of similarly thickset women, included “Long live Lili the Eunuch,” and “Put your stamp on Lili the Eunuch” and “You’ve tried men, you’ve tried women, now it’s Lili’s turn!”

It’s been a “none-of-the-above” political season in Delhi, whose voters will go to the polls to choose a new state legislative assembly on Wednesday. Rising prices have soured the mood toward the Indian National Congress, even in poor, low-caste neighborhoods like this one, where voters have supported the party almost by reflex — and yet the main opposition, the Bharatiya Janata Party, is also unloved in many quarters.

For this reason, this fall’s election has opened the door to unorthodox new players, most important, the upstart Aam Aadmi, or Common Man Party, whose attempt to unseat the heavyweights has provided this week’s main suspense.

A similar logic inspired Rajkumar Gautam, who was hunting for people to represent his Indian Bahujan Samajawadi Party, but did not have much money to spend on advertising.

What candidate could embody “none of the above” better than the eunuch Ramesh Kumar Lili, part of a mysterious, intricately structured subculture that has been part of Delhi history for more than a thousand years?

“We hear people saying that this time, they want a change,” Mr. Gautam said from the narrow storefront that serves as headquarters for his organization, a little-known group that splintered off the socialist-leaning Bahujan Samajawadi Party. “This,” he said, nodding at Ms. Lili, “will be a radical change!”

She smiled grandly in acknowledgement, reeling off a list of grievances over water and electricity prices, corruption, education and jobs.

Unlike some of the eunuchs who live in her commune, Ms. Lili was castrated late in life, so her voice is a bit husky, but she can project a stiff, well-coiffed hauteur, like a scruffy Margaret Thatcher.

“If people were happy with their government, I would not have a chance,” she said matter-of-factly. “Morally, eunuchs are better than other people. We are like beggars. We are like saints. We dance. We beat on the drums. We share people’s happiness. This is our place.”

Eunuchs began to surface as bit players in Indian politics more than a decade ago. At first, their candidacies seemed like a stunt, a creative way of expressing disdain for both the Congress Party and the B.J.P. But then, propelled by public anger over upper-caste privilege and corruption, a few of them began to win, taking advantage of seats set aside for women and oppressed castes.

India’s eunuchs are outcasts who typically live apart from their families in hierarchical communes. But they are also granted a rare space in public life, as adults who are free of social constraints, like jesters in a king’s court.

When a family is celebrating a wedding or the birth of a child, eunuchs show up to perform dances in exchange for money, and their blessings are believed to confer fertility. When displeased, often over the question of payment, they can be vengeful, spewing curses and threatening to strip naked until their target relents.

Each time a eunuch wins an election it makes national headlines, but things have not always gone smoothly after that.

Kamla Jaan, who won a mayoral election in the city of Katni in 2001, immediately pooh-poohed the advice of the businessman who had sponsored her campaign. (“We can’t control her,” he said at the time. “She’s completely unpredictable. And people are afraid to offend her because she can be abusive.”) Shewas removed from office two years later after a court ruled that she had illegally won a post reserved for a woman.

Another eunuch mayor was removed from office for the same reason in 2009.

Shabnam Mausi, who in 1998 became the first eunuch to win state office in India, was treated as a celebrity but has since found herself adrift, managing only 118 votes in a run last year, according to The Times of India. Elavarthi Manohar, a rights activist in Bangalore, said activists’ hopes that Ms. Mausi would advocate for more freedoms for sexual minorities were bitterly disappointed.

On the contrary, he said, she represented a deeply conservative, hierarchical tradition that dates to the Mughal era, which stretched from the 16th to the 19th centuries. The hierarchy protected eunuchs, but also controlled their behavior with the threat of severe punishment, enforcing strict bans on wearing male clothing, eating pork or having sexual intercourse.

“Here is this big person in the eunuch hierarchy, whatever,” Mr. Manohar said. “But definitely human rights in her own family group is not her agenda.”

Ms. Lili stood atop a truck rattling through the Mangolpuri area of New Delhi this week, blaring Bollywood anthems through a tinny P.A. system.

She ducked occasionally to avoid being whacked by oncoming branches, and people looked up at her with amusement. Many were skeptical that her candidacy was a serious one, speculating that her backers planned to approach larger parties on the eve of the election, offering to sell whatever votes Ms. Lili commanded. (Mr. Gautam denied this.)

But there was no trace of ill will. A scattering of people said they might vote for her, mainly to express their frustration with the status quo.

“We have voted for Congress, but this time we are angry with them,” said Santosh, 40, a trader. “I will not tell you why I am angry, but I am angry.”

Among the campaign’s unlikely supporters is Sunita Kogra, Ms. Lili’s wife, who is now raising their three children. During an interview, she looked up at a studio portrait, taken when Ms. Lili was still a man named Ramesh Kumar, sporting pointy white loafers and a luxuriant mustache.

“Earlier,” she said, “this was my life.”

Ms. Kogra was philosophical when asked about her husband’s transformation, which she said took place four years ago, and against his will. She said he had a job playing drums with a troupe of eunuchs and had been drawn deeper and deeper into internal rivalries until one day he was abducted, underwent surgery and returned as one of them.

“He is basically a simple man, somebody called him and he went,” she said. “Now, he is a changed man, because he lives with eunuchs. Yes, he is a woman.”

Ms. Kogra sighed. “It was a very shocking incident,” she said. “But what can you do?”

NEW DELHI — On Tuesday, the crowded lanes of Sangam Vihar were without those rickshaws outfitted with loudspeakers, which had been blaring political slogans in the lead-up to the state legislative assembly vote the next day. The last pamphlets had been doled out before being trampled under foot or used as napkins. No more mega rallies were planned, with most of the biggest political names having come and gone in the past few weeks as they campaigned for a contest seen as a preview for the national elections next year.

From those stages in and around this ramshackle corner of Delhi, the likes of Narendra Modi of the Bharatiya Janata Party, Rahul Gandhi and Sheila Dikshit of the Congress Party and Arvind Kejriwal of the Aam Aadmi Party offered what many of Delhi’s poor people hear every five years when elections come around: sweeping promises to deliver public services.

Yet because many of Sangam Vihar’s almost 100,000 residents live in “unauthorized colonies,” they are not entitled to even the most basic government provisions like water, sewage and electricity. Thus, chief among political concerns here is the “regularization” of these colonies, which paves the way for public infrastructure.

During the last election cycle and on many occasions since, Ms. Dikshit, leader of the Congress Party for Delhi, which has governed the city for 15 years, promised that all unauthorized colonies would be regularized, regardless of whether they stood on private, forest, archaeological, or other public land. She assured residents that no unauthorized colonies would be razed.

As of this month, over 1,000 provisional regularization certificates have been issued, but many in and around Sangam Vihar said that provisional status has not brought about any development. They see the status as a new way to string along optimistic constituents, like hanging a carrot in front of a rabbit on a treadmill.

At a rally on Sunday, about a mile from Sangam Vihar, Mr. Modi, the Bharatiya Janata Party’s prime ministerial candidate, challenged a Congress Party claim to a strong base among the poor. He told the colony residents: “Today, you have been forced to live in unauthorized colonies…because there is no development. Congress, which has been in power for the longest time, has not made that happen.”

An estimated 4 million people live in Delhi’s unauthorized colonies. Sangam Vihar is massive, comprising one square mile of densely packed two- and three-story buildings.

Residents and officials offered differing explanations as to how people had come to live there. Some claimed that property developers illegally built onto public forest land, while others said that predatory property dealers took advantage of refugees from India’s partition with Pakistan to whom the land had initially been allotted. Either way, the neighborhood, like thousands of others across Delhi, spread haphazardly, unmoored from public infrastructure.

It is because of informal land transfer processes, the details of which are often forgotten over the decades, that many residents worry that while they may own their house, they may not own the land underneath it. This deepens residents’ sense of vulnerability, as they cannot access public services available to those in recognized colonies around them without paying steep bribes.

Skepticism over a political solution is widespread in Sangam Vihar, where provisional status has indefinitely stalled its process of becoming a regularized colony. Ram Singh Rana, president of the Residents’ Welfare Association in K-Block, Sangam Vihar, put it bluntly: “People aren’t stupid. They have watched these politicians come and go. Every five years, after hearing the same promises, people see that they are in the same place.”

Mr. Rana said that since his area’s legislative assembly representative is with the Bharatiya Janata Party, the Congress Party, which leads the governing coalition, has neglected development.

Speaking about a neighboring constituency, he said, “Deoli is under Congress so it has been promised infrastructure while we haven’t.” He contended that providing water to both colonies should be simple as they both sit above the same pipeline from the Yamuna River.

At a meeting of Deoli’s residential association on Tuesday, where members expressed vocal support for Congress in the state elections, the concerns in the constituency were far different from that of Sangam Vihar. Instead of focusing on obtaining basic government services like water and sewage, Deoli residents were looking at ways to strengthen the community as a whole through the construction of hospitals and parks.

Very few parts of Deoli are unauthorized, even though much of that constituency resembles Sangam Vihar in its density and unruliness.

Despite entrenched party preferences, talk of the newcomer, the Aam Aadmi, or Common Man, Party was never far away in Sangam Vihar and its neighbors. At both the residential association meetings in Sangam Vihar and in Deoli, a number of those present said they wouldn’t vote for new party but were personally interested in seeing how its candidates perform.

The Aam Aadmi Party has put the regularization of unauthorized colonies at the forefront of its manifesto. However, Dinesh Mohaniya, the party’s candidate in Sangam Vihar, downplayed the necessity of regularization in an interview at his office.

“In Sangam Vihar, the biggest problem is water,” he said. “We have around 30,000 households, but only 180 bore wells. This might be changed by regularization. But the fact will remain that whosoever is in power can control the flow of water through existing pipes through corruption.”

Not a hundred yards down the alley from the party’s office, Veer Pal Singh sat on a plastic chair outside his electronics shop reading a newspaper filled with election news coverage. He said that he had gone to all the rallies and heard all the promises, including Mr. Kejriwal’s, but that the winners would be expressed only through God’s will.

He said his support on Wednesday would go to the Bahujan Samaj Party, which came in third place in the 2008 elections, if only because their candidate in Sangam Vihar was a neighbor of his. “He lives here,” Mr. Singh said. “He understands the problems we face.”

Upon further thought, Mr. Singh added, “The party has no meaning to me. Results are what I want.”